Russia's economy is facing its worst downturn since the collapse of the Soviet Union in 1991, rising inflation and capital outflows
Moody's said Russia may be in default because it was trying to serve its dollar bonds in rubles, which would be one of the worst consequences of Moscow's exclusion from the Western financial system after Putin's army's invasion of Ukraine, writes the agency Reuters .
If Moscow defaults, it will be Russia's first major foreign bond default since the 1917 Bolshevik revolution, although the Kremlin says the West is forcing it to default by imposing tough sanctions.
On April 4, Russia paid for two sovereign bonds – maturing in 2022 and 2042 – in rubles, not dollars, as was proposed under the securities.
Therefore Russia may be defaulted by Moody's if it does not rectify the situation by May 4 , ie until the end of the grace period “, – said in a statement Moody's.
” Bond contracts do not provide for redemption in any other currency than dollars, “- added there.
Moody's said that while some Russian Eurobonds issued after 2018, allow payments in rubles under certain conditions, those that were issued before 2018 – for example, with repayment in 2022 and 2042 – do not allow.
Russian Finance Minister Anton Siluanov told Izvestia in early April that if Russia was forced to declare default, it would go to court.
In 1998, Russia defaulted on its $ 40 billion domestic debt and devalued the ruble under President Boris Yeltsin. The country was virtually bankrupt after the Asian debt crisis and falling oil prices undermined confidence in its short-term ruble debt.
In 1918, the Bolshevik revolutionaries under Vladimir Lenin renounced tsarist duty, shocking the world's debt markets, as Russia then had one of the world's largest foreign debts.
This time Russia has money, but it can't pay , because the reserves are fourth the largest in the world – which Putin ordered to create just for such a crisis, frozen by the United States, the European Union, the United Kingdom and Canada.
Because Russia cannot and does not want to take loans now , default would be much more symbolic , marking the tumultuous finale of her attempt to integrate into the financial architecture of the West after the end of the Cold War, Reuters emphasizes.
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While Russia has only $ 40 billion worth of international bonds issued in $ 15 and euros, its corporations have accumulated much more foreign debt.
Earlier, the agency S&P downgraded Russia's foreign currency ratings to “selective default” due to the risks that Moscow will not be able and unwilling to fulfill its obligations to foreign debt holders.
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