For the first time in more than a century, Russia is close to defaulting on its foreign debt after facing two payment deadlines for bonds worth a combined $650 million.
The last time Russia defaulted on its foreign debt was the Bolshevik Revolution in 1917, when the social and political revolution took place in the former Russian Empire.
Fast forward to today, over the past week, Russia faced deadlines for two bonds sold to foreign investors, and while it was supposed to make the payments in dollars according to the terms of the contracts, it paid them in Rubles instead, NPR reported.
Russia cited severe sanctions by the U.S. and European nations for paying the loans in its currency which has bottomed out since the war in Ukraine began.
Now, S&P Global has announced that Russia is in “selective default,” which usually comes before full default and after a 30-day grace period.
Despite claiming that it wants to pay foreign investors, Russia says it can’t be done in dollars due to the sanctions.
Russia has been slapped with numerous wide-ranging sanctions on its financial institutions, and global banks have stopped working with the country due to its invasion.
Global banks are also stopping the nation from accessing its more than $600 billion in foreign exchange reserves.
While the U.S. has made it challenging for Russia to pay its bills, the Biden administration has argued Moscow can find a way to get it done. Especially with the EU still dependent on Russian oil and energy.
While Russia has a month, the S&P Global is not optimistic about circumstances changing for the superpower currently at war. If Russia doesn’t make its payments in dollars by early May, the country will be placed in default.
If the nation is thrown into default, Russia will be seen as an outcast in the global economy, stopping it from selling bonds and helping grow its currencies in the future.
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