Russia tried to pay in rubles for two dollar-denominated bonds maturing on April 4, S&P said in a note on Friday. The agency said it was a “selective default” as investors were unlikely to be able to convert rubles into “dollars equivalent to the amounts originally due”.
According to S&P, selective default is declared when an enterprise has failed to meet a specific obligation but not all of its debt.
Moscow has a grace period of 30 days from April 4 to make payments of capital and interest, but S&P said it did not expect to convert them into dollars given Western sanctions, which undermine its “willingness and technical ability to comply” with its obligations. you are.
The complete default on foreign currency will be Russia’s first in more than a century, when Bolshevik leader Vladimir Lenin gave up bonds issued by the tsarist government.
Russia has no access to approximately $ 315 billion of its foreign exchange reserves as a result of Western sanctions imposed following its invasion of Ukraine. Until last week, the United States allowed Russia to use some of its frozen assets to pay off certain investors in dollars. Since then, however, the US Treasury Department has blocked the country’s access to its reserves in US banks, part of its efforts to increase pressure on Russian President Vladimir Putin and further reduce his military basket.
JPMorgan estimates that Russia had about $ 40 billion in foreign currency debt at the end of last year, about half of which was held by foreign investors.
Moscow is preparing to go to court
Russia is now planning legal action.
“We will sue because we have taken all necessary actions to get investors to receive their payments,” Finance Minister Anton Siluanov told the pro-Kremlin newspaper Izvestia on Monday.
“We will show judicial evidence of our payments to confirm our efforts to pay in rubles, just as we did in foreign currency. This will not be an easy process, “he added. He did not say who Russia plans to sue.
Kremlin spokesman Dmitry Peskov told a news conference last week that any default would be “artificial” because Russia has dollars to pay – it simply does not have access to them.
“There are no grounds for real bankruptcy,” Peskov said. “It’s not even close.”
Russia has worked hard to artificially support the ruble – which sank as much as 40% to less than a cent in the days after the invasion – including by raising interest rates to 20% and forcing exporters to exchange most of their revenues. foreign currency for rubles.
The measure is still in force, but the central bank has decided to ease some other restrictions, Reuters reported on Monday, and last week announced it was cutting interest rates to 17%.
The ruble traded at $ 79 on Monday, according to Refinitiv. This is about 5% lower than on Saturday.
– David Goldman and Chris Liakos contributed to the report.
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