By Karin Strohecker and Andrea Shalal and Emily Chan
LONDON (Reuters) – Russia defaulted on its foreign sovereign bonds for the first time in more than a century, the White House said, as sweeping sanctions effectively excluded the country from the global financial system and made its assets untouchable.
The Kremlin, which has the money to make the payments thanks to oil and gas revenues, quickly rejected the claims, accusing the West of driving the country into an artificial default.
Earlier, some bondholders said they had not received accrued interest on Monday after a key payment deadline expired a day earlier.
Russia has struggled to meet payments on $40 billion in bonds since its February 24 invasion of Ukraine.
“This morning’s news about the discovery of Russia’s default, for the first time in over a century, situates the strength of the actions the US, along with allies and partners, have taken, as well as the impact on the Russian economy,” one said. US authority on the sidelines of a G7 summit in Germany.
Russia’s efforts to avoid what would be its first major default on international bonds since the Bolshevik revolution more than a century ago hit a snag in late May when the US Treasury Department’s Office of Foreign Assets Control effectively blocked Moscow from making payments.
“Since March we had thought that a Russian default was likely to be inevitable, and the question was just when,” Dennis Hranitzky, head of sovereign litigation at law firm Quinn Emanuel, told Reuters ahead of Sunday’s deadline.
A formal default would be largely symbolic, as Russia cannot borrow internationally at the moment and does not need to do so thanks to abundant oil and gas export earnings. But the stigma will likely increase your borrowing costs in the future.
The payments in question are $100 million in interest on two bonds, one denominated in dollars and the other in euros, which Russia was due to pay on May 27. The payments had a 30-day grace period, which expired on Sunday.
Russia’s Ministry of Finance said it had made payments to its National Settlement Depository (NSD) in euros and dollars, adding that it had complied with its obligations.
In a call with reporters, Kremlin spokesman Dmitry Peskov said Russia made the bond payments due in May, but the fact that they were blocked by Euroclear because of Western sanctions on Russia “is no problem.” our”.
With no exact deadline specified in the prospectus, lawyers say Russia may have until the end of the next business day to pay bondholders.
Credit rating agencies usually formally lower a country’s rating to reflect default, but this does not apply in the case of Russia as most agencies no longer rate the country.
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