Russia spirals to breaching debt default deadline for first time since 1988: Report

For the first time in a century since the ouster of last Emperor of Russia, Czar Nicholas II, and the Bolshevik revolution in 1988 Russia may be on the edge of its first default on its foreign debt. Mosocw has at least three interest transfers pending totaling to an amount of $400 million which is due on Thursday and Friday. Russia's inability to make the payments towards the dollar-issued debt in foreign currency, and instead  paying in own currency Roubles might  constitute a default because it breaches the terms of the contract.

Moscow has a total of US$40 billion worth of debt in dollars and euros, majorly owned by the foreign investors. And the US Treasury earlier imposed the restrictions on Russia's accounts against the dollar debt payments. Moscow has already breached the terms on two bonds. It's Sunday deadline is from the previous missed payments  in May which expires at the end of the day on June 26. 

Defaulting on the foreign debt would be a clear indicator that the barrage of sanctions coordinated against Russia by the West in response to its war in Ukraine are having the desired effect on the Russian economy. Moscow is unable to make the payment in Dollars as it is unable to transfer the cash.The US and the EU had earlier frozen the Moscow central bank’s foreign reserves and disconnected Russia from the SWIFT international financial system.

The West-led asset blocks raised fears that Russia's president Vladimir Putin holds a 90% chance that his country will most likely default on the foreing payment this year, ICE Data Services figures revealed. Immediately after the sanctions, Russia paid an estimated $117 million in interest on dollar bonds as the value of the debt holders' assets plunged due to the sanctions. Moscow last defaulted in 1998, but on domestic debt. While Russia foreing bonds paid in dollars have a 30-day grace period, Russia's Finance Minister Anton Siluanov who serviced it Rubles iterated that it does not signify a "default." 

“We’ve done everything we can to lead the horse to water, but it’s not up to us whether it wants to drink or not,” Siluanov told the state affiliated Tass. “Western countries are trying in every possible way to make Russia declare default,” he added this week. 

Russia fulfils Eurobonds obligations using new mechanism 

Russia's finance minister earlier annoucned that Moscow "fulfilled all its obligations" on two dollar-denominated Eurobonds "in full" by making the payments well in time. He iterated that Russian Federation has made the interest payments in its own currency Roubles to its National Settlement Depository as it seeks to avoid the sovereign default. President Vladimir Putin had signed a decree to make new rules that were aimed at fulfilling Russia's foreign debt obligations so the nation does not default on the debt.

Russian Finance Ministry had earlier snubbed the suspicions that Moscow's Eurobond obligations are "in default." At a state presser, the ministry iterated that the Kremlin has enough funding to pay off its debts well in time and as per the schedule. It furthermore noted that payments have been due to a few international investors as Russia decided to put it on hold owing to speculations of some illegal activities by American banks and the US government as they refused to make payment to Russia in foreing currency. Russia, as a responsible borrower, has taken additional efforts to protect the rights of investors by reserving the required amounts in rubles in a Russian depository, the foreing ministry of Moscow had reiterated.