The rating agency Moody’s said that Russia could be in default (defaulting due to non-fulfillment of legal obligations or conditions of a loan) because it tried to pay off its dollar bonds in rubles, which would be one of the harshest consequences to date of the Moscow’s exclusion from the Western financial system since invasion of ukraine by President Vladimir Putin.
If the situation is declared, it would mark Russia’s first major default on foreign bonds since the years following the 1917 Bolshevik revolution, although the Kremlin says the West is forcing a default by imposing crippling sanctions.
Russia made a payment due April 4 on two sovereign bonds — due in 2022 and 2042 — in rubles, rather than in dollars, as required by the terms of the bonds.
Deadline to declare default is May 4
Russia, therefore, “may be considered in default, in Moody’s definition, if [a situação] is not remedied by May 4, which is the end of the grace period,” Moody’s said in a statement Thursday.
Bond contracts are not payable in any currency other than dollars.
Moody’s said that while some Russian eurobonds issued after 2018 allow payments in rubles under certain conditions, those issued before 2018 — such as those due in 2022 and 2042 — do not.
“Moody’s opinion is that investors did not obtain the contractual promise in foreign currency on the due date of payment,” Moody’s said.
The Russian Finance Ministry did not respond to a request for comment on Friday. Finance Minister Anton Siluanov told Izvestia newspaper earlier this month that if Russia is forced to default, it will take legal action.
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