Russia is considered to have defaulted on its foreign debt for the first time since 1918.
The country’s failure to pay lenders $100 million by Sunday was also the first default on debt in any form in nearly two-and-a-half decades.
Even though the world’s third-largest crude producer holds the cash, fines from the West in response to its invasion of neighboring Ukraine are hampering the transfer of the sum to overseas creditors, which are due on Sunday.
One last effort of Moscow Paying out the money has been impossible in light of a months-old ban by the West on payment platforms and banking systems to facilitate such transactions, a stumbling block in his quest to save face and protect his honour.
As the failure was caused by Western sanctions on Russia over its invasion of Ukraine, the country refused to accept that it had defaulted, with Russia’s finance minister calling the development “a sham”, the BBC said on Monday.
It could have implications beyond the immediate future, given that the country does not seek financing abroad as it enjoys vast oil wealth, Chris Weafer, who runs Macro Advisory, a Moscow-based consultancy.
He warned, however, that the situation could deteriorate for a long time if the war with Ukraine and punitive measures from the West are stronger.
“This is the kind of action that is hanging over the economy and will make the recovery much more difficult when we get to that stage,” he said, quoted by the BBC.
According to Russia, the $100 million interest payment was transferred to the Euroclear bank with the expectation that it would be disbursed to creditors from there.
But no further progress has been made since then, and the creditors have yet to receive their money.
The Russian bonds, held by Taiwanese investors and priced in euros, have received no interest payments, Reuters said, based on information from two sources.
The payment, which is due May 27, is now behind a 30-day grace period that expired on Sunday, making it a default.
Euroclear declined to comment on whether the transaction stalled too much as it admitted to having complied with all sanctions imposed since the start of the hostility with Ukraine.
The Russian Federation refused to accept it in default.
“Everyone in the know understands that this is not a breach at all. This whole situation looks like a farce,” Finance Minister Anton Siluanov said.
About $20 billion of Russia’s debts are held by foreign investors and are valued in dollars or euros.
“Some parts of that debt will now become automatically due because there will be prepayment clauses in all the debt instruments, so if you default on one, it usually triggers immediate demand for payment on the other debts, which Russia could certainly face. immediate debt repayment of around $20bn at this stage,” Weafer told the BBC.