According to reports, the Russian Federation has defaulted on its foreign debt for the first time since 1918. Bondholders told the press that they had not received payments from the transcontinental country. However, Russia’s finance ministry denies the allegations and says the country made the payments via the Euroclear monetary system.
Russia Is Accused of Foreign Debt Default, Moscow’s Finance Ministry Claims the Country Paid Bondholders
Media reports are claiming that Russia has defaulted on its foreign currency debt for the first time in more than 100 years. Financial sanctions against the transcontinental country have made it difficult for Russia to access the international payment systems. On Sunday, a $100 million interest payment was allegedly missed after the U.S. Treasury blocked a method that allowed the Kremlin to pay its debts by converting rubles.
Now that the grace period is over, bondholders will have to agree on whether or not it is officially a default against the loans. Reuters claims Russia’s move to not pay is “an act of political theatre at bondholders’ expense” and default makes them “political stooges.” The Kremlin, however, claims otherwise and says that the default is a “farce” because Western sanctions blocked the country’s payments. Russia’s finance ministry said it had made the payments to bondholders denominated in euros.
Russia Blames Financial Blockade — Kremlin Spokesperson Says It’s ‘Not Our Problem’
The Russian government entity says the default claims are artificial, it has the funds to pay and sanctions are the only reason why institutions do not have the ability to accept funds from the country. The last time Russia defaulted on foreign debt was in 1918 during the Bolshevik Revolution. An NBC report has quoted a Kremlin spokesperson, Dmitry Peskov, who told the reporters that the payment was blocked by Western sanctions and because of this fact, Peskov said it’s “not our problem.”
Reports further show that the Russian Federation claims it leveraged its onshore National Settlement Depository (NSD) and the Euroclear monetary system. The Kremlin insists that despite the financial blockade it had fulfilled its obligations to foreign investors. Reuters reports that Russia’s President Vladimir Putin codified a decree that picks specific banks to handle the bondholder payment obligations. Furthermore, Putin aims to travel to Tajikistan on Tuesday as it will be the president’s first trip since the start of the ongoing war.
What do you think about the media claims that say Russia defaulted on its foreign debt? Do you agree with the Kremlin’s statements? Let us know what you think about this subject in the comments section below.
June 28, 2022
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