Sanctions lead Russia to its first default in 100 years

By Our Special Correspondent

Russia defaulted on its external sovereign bonds for the first time in a century, the culmination of Western sanctions that closed payment channels to foreign lenders.

Months later, Russia found a way around the fines imposed after the Kremlin invaded Ukraine. But by the end of Sunday, the grace period over about $ 100 million in trapped interest payments on May 27 had expired, defining it as an "event of default".

The way to this stage is far from normal as Russia has the resources to pay its bills - and has tried to do so - but has been blocked by sanctions. Those restrictions also mean that there is huge uncertainty about what will happen next and how investors will get their money.

"As Russia benefits from the high cost of its energy exports, it clearly has both the means and the desire to repay its foreign debt," said Giles Coglan, chief analyst at HYCM Group. It "defaults to technology, so most investors may be willing to wait for it."

Moody’s Investors Service said the missed payments constituted a default under its definition and warned that the government would likely also default on future bond payments. Moody’s and other assessment firms no longer rate Russia due to sanctions.

Given the damage already done to the economy and markets, the default are also very symbolic right now, and much less for Russians dealing with double-digit inflation and the worst economic contraction in years. However, it is a terrible sign that the country is rapidly transforming into an economic, economic and political outcast. The country's Eurobonds have been trading at difficult levels since early March, with the central bank's foreign reserves frozen and the largest banks isolated from the world economy.