Kremlin: No reasons for insolvency
Since the February 24 invasion of Ukraine, sweeping sanctions have locked Russia out of the global financial system. Since then, Moscow has struggled to make payments on outstanding bonds totaling $40 billion, despite billions in foreign exchange reserves.
The Kremlin has repeatedly stated that it sees no reason for default. However, due to the sanctions, it is not possible to transfer money to the bondholders. The West is therefore accused of wanting to force the country into artificial insolvency. As for short-term new borrowing by Russia, a formal default would be largely symbolic, as Moscow is currently unable to borrow internationally anyway, and thanks to its rich oil and gas revenues, it doesn’t have to.
But the stigma would likely increase its cost of borrowing in the future — and for many years to come. According to the Ministry of Finance in Moscow, Russia made the payments for the bonds in euros and dollars to its central securities depository NSD. However, it is considered unlikely that the funds will find their way to the many international holders. For many bondholders, failure to transfer money owed to their accounts on time constitutes a default.
