On Sunday, Russia could default on the equivalent of 100 million dollars (about 95 million euros) of sovereign debt. If Moscow does not reimburse sovereign bond investors by Sunday evening, it will default for the first time in the 21st century, according to the “Financial Times” this Friday, June 24.
The sanctions imposed by the United States and the European Union on Russia after the invasion of Ukraine on February 24 have affected the ability to reimburse foreign investors for the money invested.
Although Moscow has on its side the currency it receives in payment for the gas and crude it exports, its use is difficult because, due to the sanctions in force, it is practically impossible to make payments through the circuits international payments.
The repayment of this line of bonds should have taken place on May 27. A 30-day moratorium was granted on the repayment of debt to investors. This moratorium ends this Sunday and could trigger the first Russian default since 1998.
The Russian state said it transferred the funds to the National Settlement Deposit, the Russian institution responsible for sovereign debt payments.
However, the traditional circuit has been broken by sanctions, as the next step would be the transfer of these funds to international settlement centers such as Euroclear or Clearstream, based in Belgium and Luxembourg respectively.
None of these institutions can receive sums from the Russian depository, an institution on the Western sanctions list.
According to Timothy Ash, emerging markets strategist at BlueBay Asset Management quoted by the Financial Times, “Russia is about to default because it invaded Ukraine and is committing war crimes…determine what can get here”.
According to Russian Finance Minister Anton Siluanov, the West wants to force Russia into an “artificial default”. And, to avoid it, the Russian government has passed a law that allows payment in rubles and subsequent conversion into other currencies, with a view to payments from next Thursday and Friday of 400 million dollars (380 million euros).