Russia defaults on overseas debt for first time in years

Russia has denied the claim

Arpan Rai
Monday 27 June 2022 11:13 BST
Russian deputy PM criticises western sanctions

Russia has defaulted on its foreign debts payment for the first time in years as its economy bleeds from the sanctions imposed by western nations in response to the invasion of Ukraine.

Moscow faced a Sunday deadline to pay off the interest worth about $100 million, originally due on 27 May,  and meet a 30-day grace period. However the term expired without payment.

It is Russia’s latest economic collapse on the debt-front following a default on its domestic debts in 1998 and and after the 1917 Bolshevik Revolution where Moscow failed to pay off its international debts.

Russia owes about $40 bn in foreign bonds. Russian officials denied the reports of a default, however. Finance Minister Anton Siluanov on Thursday said that “anyone can declare whatever they like. But anyone who understands what’s going on knows that this is in no way a default,” reported Bloomberg.

The Kremlin also rejected the claims on Monday. In a call with reporters, Kremlin spokesperson Dmitry Peskov said Russia made bond payments due in May but the fact they had been blocked by Euroclear because of Western sanctions on Russia was “not our problem”.

Rating agencies monitoring the situation, like Standard & Poor’s and Moody’s, have already categorised the country’s debt into junk territory.

The rumblings in the Russian market continued elsewehere as the Ruble, which plummeted to a historic low just hours after the invasion, was recorded down by about 40 per cent against the dollar on Monday.

For more than 120 days now, Russia’s central bank’s foreign reserves have remained frozen and its top banks excluded from the global financial system.

Sanctions imposed by Ukraine’s allies have damaged the Russian economy and pushed foreign companies to exit the Russian market. Experts warn that the confirmation of default could lead to further isolation and disruption of Moscow from the international payment system.

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