Russia’s invasion of Ukraine resulted in several sanctions from the Western government, which has affected the country’s economic situation.
Russia has now defaulted on its foreign debt for the first time in over a century. While the country has enough funds to settle the debt, sanctions imposed on the government made it difficult to meet the $100 million payment deadline of interests on June 26, 2022.
Western governments slammed Russia’s use of foreign currency for international payments and transactions. As a result, Kremlin was unable to distribute its payout to international creditors. Kremlin made the payment in the Russian ruble but it was rejected. The missed payment after the 30 days of grade has been considered a default.
Russia Insists The Issue Should Be Termed A Default
Kremlin has rejected that claim of default, saying it made the payment before the deadline. Dmitry Peskov, the spokesperson to the Rusian government, stated that payments were made in May, but they were blocked by Euroclear due to Western sanctions. He further noted that since the payment was made, but only rejected, it cannot be seen as a default in payment.
The Western sanctions have hit seriously hit Russia, especially on economic aspects. In an attempt to evade some of these sanctions, the government decided to engage in crypto transactions and payments with its currency ruble. However, this has not yielded the required result.
Attempts to circumvent sanctions took a further blow last month when the US Treasury Department deliberately allowed a major exemption to expire. In the past, the waiver was enabled.
Russia May Default On Its Foreign Debt For The First Time Since 1918
Russia’s central bank processes payments to bondholders in USD through international banks. But that waiver is no longer allowed and Western governments tighten their sanctions on Russia.
According to reports, some Taiwanese bondholders are yet to receive their payments, which were due on May 27. This indicates that Russia may enter its first foreign debt default since 1918, despite the willingness and having enough cash to pay.
