Russia has defaulted on foreign debt by offering bondholders payments in rubles instead of dollars, according to the S&P rating agency.
Russia has tried to pay in rubles for two dollar bonds maturing on April 4, according to a S&P note on Friday. The agency said it was tantamount to a “selective default” as investors are unlikely to be able to convert rubles into “dollars equivalent to the amounts initially payable”.
According to S&P, a selective default is declared when the organization defaults on a specific obligation, but not on the entire debt.
Moscow has a 30-day delay from April 4 to make capital and interest payments, but S&P has said it does not expect it to convert them into dollars, given Western sanctions that undermine its “willingness and technical ability to meet the conditions” of its obligations.
BREAKING: Russia has defaulted on its foreign debt.
— Jon Cooper (@joncoopertweets) April 11, 2022
A complete currency default was the first for Russia in more than a century, when Bolshevik leader Vladimir Lenin renounced bonds issued by the tsarist government.
Russia is unable to gain access to about $ 315 billion from its foreign exchange reserves due to Western sanctions imposed after its invasion of Ukraine. Until last week, the United States allowed Russia to use some of its frozen assets to pay off some dollar investors. But since then, the US Treasury has blocked the country’s access to its US bank reserves as part of efforts to increase pressure on Russian President Vladimir Putin and further reduce his military stockpile.