Russia is approaching its first default in 100 years

Russia is "only a few hours" away from defaulting on its external debt, a dramatic moment in the financial battle that the US and several other countries have unleashed against the Kremlin, writes Bloomberg.

A month ago, the United States deprived Russia of the ability to service external debt in the loan currency, non-resident holders did not receive a coupon on May 27, and the grace period expires tomorrow, June 27. We are talking about interest payments on bonds for about $100 million.

As Bloomberg explains, there will be no official statement - default is usually announced by international rating agencies, but they have suspended their activities in Russia. The bondholders could issue a joint statement, but they are still trying to assess what the chances are of getting their money back, or at least some of it.

The agency calls the "default event" mostly symbolic, since "Russia has already become a de facto pariah country for almost the entire world in the economic, financial and political arenas." For the state, this will be the first default on external debt since 1918, when the Bolsheviks abandoned the debts of the tsarist regime.

The question is what will happen next, because this time the markets are faced with a unique situation: a borrower facing default has both the desire and resources to pay off creditors, but cannot do this due to sanctions, the agency notes.

Russia is already challenging the default. As Finance Minister Anton Siluanov stressed this week, the main thing is that Russia made the payment, and changing the payment currency cannot be regarded as improper performance of debt obligations, especially in a force majeure situation.

• From the point of view of prospects, it is important to keep track of payments that have been hanging in Euroclear for almost a month. “Money has not yet reached the holders in Euroclear. In theory, they can announce an event of default on June 27, but the nuance is that the claim should be against Euroclear (if, of course, it has not yet returned the funds to NSD),” the chief economist of the Russian investment company told The Bell .