Ukraine war: Russia slips into default zone as payment deadline expires
- Russia had faced a Sunday night deadline to meet a 30-day grace period on interest payments originally due May 27
- Moscow has accused the West of trying to drive Russia into an ‘artificial default’ after shutting payment routes to overseas creditors
Russia looked set for its first sovereign default in decades as some bondholders said they had not received overdue interest on Monday following the expiry of a key payment deadline a day earlier.
Russia has struggled to keep up payments on US$40 billion of outstanding bonds since its invasion of Ukraine on February 24, as sweeping sanctions have effectively cut the country off from the global financial system and rendered its assets untouchable to many investors.
The Kremlin has repeatedly said there were no grounds for Russia to default but it was unable to send money to bondholders because of sanctions, accusing the West of trying to drive it into an artificial default.
“Anyone can declare whatever they like,” Finance Minister Anton Siluanov said last Thursday. “But anyone who understands what’s going on knows that this is in no way a default.”
Russia’s efforts to avoid what would be its first major default on international bonds since the Bolshevik revolution hit an insurmountable roadblock in late May when the US Treasury Department’s Office of Foreign Assets Control (OFAC) effectively blocked Moscow from making payments.
“Since March we thought that a Russian default is probably inevitable, and the question was just when,” Dennis Hranitzky, head of sovereign litigation at law firm Quinn Emanuel, said. “OFAC has intervened to answer that question for us, and the default is now upon us.”