In May, Russia was already unable to service the coupons on two bonds. Now grace the period for the interest due has expired.
Russia's interest payments on two foreign currency bonds, one denominated in US dollars, and another in euros, have come due. Several investors in Taiwan complained Sunday that they had not yet received any of the agreed interest payments on their Russian government bonds, «Reuters» reported, citing people familiar with the matter.
According to the report, the interest payments due amount to 29 million euros for a sovereign bond maturing in 2036 and 71 million US dollars of paper due in 2026.
Payments Unlikely
Who is to blame for the now late payments depends on whom one asks. Russia says it has enough funds to meet the obligations because it continues to receive oil and gas revenues. But sanctions are hampering the payments since Russia was expelled from the SWIFT international payments system. It is therefore unlikely the money will reach investors.
Rating Crux
As a rule, a country's insolvency or default is determined by rating agencies such as Moody's or S&P, although they have since stopped rating Russia. What remains now is for bondholders who collectively hold at least 25 percent of the bonds to come together to declare a default.
Russia's Finance Minister Anton Siluanov had called his country's looming default a «farce» last week, and contends the West wants to drive Russia into an artificial default, he said.
Memories of Revolution
In total, Russia reportedly has about 40 billion US dollars in foreign-currency bonds outstanding. Even if the technical default is seen as only symbolic, it is likely to have a long-term impact on the country's borrowing costs when issuing new bonds.
The last time Russia defaulted on foreign bonds was in 1918 after the revolution. During the ruble crisis of 1998-99, only payments on domestic bonds were suspended.
