Russia has lost access to their foreign currency reserves with increased sanctions on the country invading Ukraine resulting in fears of default.
Russia was supposed to pay $117m in coupon payments to investors of dollar-denominated bonds. However, international sanctions have locked most of the country’s foreign exchange reserves leaving Russia in a fix.
Russia said they have sent an order for the payment of $117m to Citibank and is awaiting to see if US authorities permit the payment.
From Russia’s perspective, they are not defaulting as they believe that they have means to meet the payment. Russia has suggested that the payments can be made in roubles if the order was not accepted.
As of today, the country has began their grace period of 30 days to meet the payments in dollars whilst still awaiting the verdict of whether a default has occurred.
Later today, an update regarding the payment reaching Citi will be released. If the country’s payment is not accepted, it will be their first foreign currency default since 1917.
Russia defaulted in rouble denominated bonds in 1998.