Russian Finance Minister Responds to Default Label Claims

Russia is just “a few hours” away from defaulting on its external debt, according to Bloomberg, which references the terms of its debt obligations. Today, June 26, marks the expiration of the grace period for the payment of interest on approximately $100 million in eurobond debt.

If investors do not receive the payment by the deadline, a “default” will occur on Monday morning, Bloomberg reports. According to the agency, this would mark Russia's first default on external debt in the past century, since the Bolsheviks, who came to power in 1918, refused to pay the debts of the Russian Empire.

Russia came close to defaulting immediately after deploying troops into Ukraine but managed to avoid it by switching to alternative payment methods. However, in May, U.S. authorities closed the loophole that allowed Moscow to maneuver, Bloomberg notes.

Now, global markets are facing a “unique situation” where the borrower is prepared and has the resources to pay its creditors but cannot do so due to sanctions, the agency adds.

Theoretically, the international rating agencies are supposed to declare a default on Russia, but sanctions prevent them from conducting business in the country, Bloomberg states.

Russian Finance Minister Anton Siluanov rejected the notion this week that halting payments on Russia's state debt in foreign currency constitutes a default, stating that Moscow is “taking all possible steps to fully pay all investors.”

“There are all grounds to believe that creating artificial obstacles for the Russian Federation’s external public debt servicing is necessary to attach the label of ‘default.’ You can declare anything and try to label it. But everyone who understands knows that this is not a default,” the minister said.