The country defaulted on its national debt in 1998, but not on its external debt since 1918.
Investors’ failure to receive money is not the result of non-payment, but is caused by third-party actions that are not directly accounted for […] as defaultthe Russian Ministry of Finance stressed in a statement on Monday.
These allegations of Russian default are completely illegitimatestressed Dmitry Peskov, spokesman for President Vladimir Putin, referring to financial news agencies that declared Russia insolvent.
Even if Moscow has sufficient funds, the sanctions imposed after its offensive against Ukraine mean that the country can no longer make payments in western currencies to pay off interest and its foreign debt denominated in dollars or euros.
In anticipation of the blockade, the Treasury Department had paid around $100 million in interest upfront as of May 20, before the restrictions finally went into effect five days later. But these sums were never transferred to the creditors, the bank intermediaries blocked them because of the sanctions, the Russian ministry emphasizes.
This means that Russia has been in default of payment since Sunday evening, the deadline for the relevant regulations.
Moscow is also likely to miss all of its foreign debt maturities scheduled for the end of the year, which affect hundreds of millions of dollars.
The international payment and settlement systems received the funds in a timely and complete manner and had the legal and financial means to transfer the funds in question to the final recipientsdenounced the Russian Ministry of Finance.
These two payments are the latest Moscow has tried to make in foreign currency. Since the end of May, Russia has been saying it will repay its dollar or euro debt in rubles, but this also exposes itself to insolvency.
An artificial and deliberate collapse
The Kremlin denounces a purely artificial and unjustified situation, while the West claims that Russia should be banned from the international financial system for attacking its Ukrainian neighbor.
Last week, Russian Finance Minister Anton Siluanov described the situation as
This is not our country’s fault, but the artificial and deliberate collapse of the international regulatory systemdenounced the Vice-President of the Upper House of Parliament Konstantin Kossatchev to the Ria Novosti agency.
For his part, the Kremlin spokesman warned against any attempts by the West to appropriate the Russian financial reserves of around 300 billion dollars frozen abroad under Western sanctions against Moscow under the pretext of insolvency.
illegitimately frozen and any attempt to use them is also illegitimate, it will be practically thefthe pointed out.
With the three major international financial rating agencies no longer rating Russia, it falls to an organization that brings together major international banks (Credit Derivatives Determination Committees) to assess whether or not Russia is defaulting on payments to its creditors.
In 1998, almost two years before Vladimir Putin arrived in the Kremlin, Russia was being shaken by the fallout from the fall of the Russian FederationUSSRthe crisis in the Asian economies and the drop in commodity prices, was forced to forego payment terms on its sovereign debt and a moratorium on its external debt, a humiliation.
The country, whose public debt in foreign currencies reached $141 billion at the time, had to wait twelve years to be able to borrow money on the international markets again.
The last time Russia defaulted on its external debt dates back to 1918 and Lenin’s decision not to default on the Tsarist regime’s debts.