Russia has defaulted on international bonds for the first time in a century, the United States says

Russiahas defaulted on international bonds for the first time in over a century, the White House said. , Makes that asset out of control.

Kremlin, who has the money to pay thanks to oil and gas income, quickly rejected the claim and accused the West of driving it into an artificial default. ..

Earlier, some bondholders stated that they did not receive overdue interest on Monday after the expiration of their major payment deadlines on Sunday.

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Russia Since the invasion of Ukraine on February 24, we have struggled to maintain payments of US $ 40 billion of issued bonds.

"News this morning The United States, along with its allies and partners, discovered Russia's default for the first time in over a century. You can see how powerful the actions were and how dramatic the impact was on Russia's economy. ”Official officials said bystanders at the G7 Summit in Germany.

Russia's efforts to avoid the first major defaults in international bonds since the Bolshevik Revolution over a century ago have been effectively undertaken by the Foreign Asset Management Authority (OFAC) of the U.S. Treasury Department. It became an obstacle in late May when it was blocked. Moscow does not pay.

"Since March, I thought Russia's default was probably unavoidable. When was the problem?" Said Dennis Franitzky, head of the sovereign lawsuit at law firm Quinn Emmanuel. Told Reuters before the Sunday deadline.

"OFAC has intervened to answer that question for us, and the default is now for us."

Official defaults would be largely symbolic given Russia at this time international You can't borrow it, and you don't have to borrow it because of the abundant oil and gas export revenues. However, stigma will probably increase its borrowing costs in the future.

The payment in question is interest of US $ 100 million on two bonds, one in US $ The other is Russia's euro denominated. Payment was scheduled to be paid on May 27th. Payment has a 30-day grace period and expired on Sunday.

The Russian Ministry of Finance said it had paid the National Settlement Vault (NSD) on land in euros and dollars, adding that it had fulfilled its obligations.

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In a call with a reporter, Kremlin spokesperson Dmitry Peskov said that the fact that Euroclear blocked payments due to Western sanctions against Russia "is not our problem." Stated.

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Clearing House Euroclear did not respond to your request for comment.

Some Taiwanese bondholders did not receive payment on Monday, sources told Reuters.

The outlook does not specify an exact deadline, so lawyers say Russia may pay these bondholders by the end of the next business day.

Credit rating agencies usually officially downgrade a country's credit rating to reflect defaults, but this applies in the case of Russia as most institutions no longer rate countries. not.

Legal entanglement

The legal situation surrounding bonds looks complicated.

Russian bonds are issued under unusually diverse terms and were recently sold when Moscow was already there. The level of ambiguity is increasing, facing sanctions in the 2014 Crimea merger and the 2018 UK poisoning case.

Rodrigo Olivares-Caminal, Chairman of Banking and Financial Law at Queen Mary University in London, has dismissed Russia for his obligations, or the difference between receiving and collecting payments.

"All of these issues are subject to court interpretation," Olivares-Caminal told Reuters.

In a sense, Russia is already It is the default.

The Committee on Derivatives has determined that a "credit event" has occurred on some of the Russian securities. This resulted in payments for some of Russia's credit default swaps. This is the method investors use to guarantee default.

This is Russia's failure to pay US $ 1.9 million in accrued interest due in early April. Was the cause.

Until the invasion of Ukraine, sovereign defaults seemed unthinkable, and Russia had an investment grade rating shortly before that time. Defaults are also rare, as Moscow has the money to repay its debt.

The US Treasury's OFAC issued a temporary exemption called General License 9A in early March to allow Moscow to continue paying investors. The United States revoked the exemption on May 25 as Washington tightened sanctions on Russia and effectively blocked payments to US investors and entities.

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The expired OFAC license is Russia's only obstacle. In early June, the European Union imposed sanctions on NSD, the agent for Russia's Eurobond.

Over the past few days, Moscow has tried to deal with future payments and find ways to avoid defaults.

President Vladimir Putin began interim proceedings last Wednesday, signing a decree giving the government a 10-day grace period to select banks to process payments under the new scheme. Russian land.

"It's not all that Russia says it complies with its obligations under the terms of the bond." The crime and investigation at Zia Ullah Law Office Evershed Sutherland, Partner and Head of Business, told Reuters.

"For example, if you are not satisfied as an investor, for example, if you know that money is stuck in your escrow account, this is effectively what Russia is saying. It has a practical impact. You have fulfilled your obligations and you do not meet the terms of the bond. "

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