Moodys Investors Service warned on Thursday that Russia could be at risk of defaulting on two bonds after the country made payments on both in rubles and not U.S. dollars.
The credit ratings agency said that only dollars could be used in repayment for both bonds, according to their contracts. If the repayment is not corrected before May 4, Moodys warned it could be considered a default.
In response to Russias invasion in Ukraine, certain Russian banks were kicked out of the SWIFT international banking system and top Russian banks have been sanctioned.
Given that Russia cannot access certain assets abroad, it warned that it could begin using rubles to pay foreign debt. Russian officials alleged that Western countries were trying to provoke Russia to artificially default on its debt.
Russian Finance Minister Anton Siluanov said last month the freezing of the central bank and governments foreign currency accounts can be seen as a desire from several Western countries to organise an artificial default.
If Russia is unable to pay either of those bond payments with dollars instead of rubles before the grace period expires in May, it would be the country’s first big foreign loan default in more than 100 years, The Washington Post noted.
The risk of a default only adds to Moscows economic woes as key exports, politicians and others have been sanctioned by the United States and elsewhere in protest of its invasion in Ukraine. A number of companies have also announced that they are halting business in Russia.
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