Russia defaulted on part of its foreign currency denominated debt on June 27, 2022 and it is the first such default since 1918.

New Delhi (ABC Live); Russia defaulted on part of its foreign currency denominated debt on June 27, 2022 and it is the first such default since 1918.

ABC Research team Keeping close watch on Russia refers an article based upon research sources available online;

It is  mention worthy that in February 2022, United States imposed sanction against Russia after the 2022 Russian invasion of Ukraine and immobilized Russian central bank assets that are held in the United States.

According to reports the $284 billion or more in frozen assets is nearly half of the $585 billion that Russia had stockpiled as of June 2021.

The Biden administration initially allowed Russia to continue to repurpose the substantial funds it has kept in U.S. financial institutions to make required payments on its sovereign debt. But on April 4, the Treasury Department banned Russia from withdrawing funds held in US banks to pay off its debt obligations.

On 4 April 2022, Russia technically defaulted on its foreign debt by failing to pay its obligations in US dollars (and after the grace period it actually defaulted because it did not pay 30 days grace period interest of around 1.9 million USD).

Two dollar denominated bonds issued by the Russian government matured on 4 April 2022. On 5 April, Russia attempted to pay its bondholders with dollars from $600 million of reserves held in US banks, but these were blocked by the US as part of the sanctions against Russia for its invasion of Ukraine.

Previously, on 16 March, Russia managed to pay through a new method (acting on a general license issued by the US Office of Foreign Assets Control, which was valid until May 25) and thus avoided technical default, it also threatened to sue if forced into default or use cryptocurrency.

Earlier, Russian Minister of Finance Anton Siluanov said that Russia would repay its foreign currency debt only if its foreign currency accounts were unfrozen.

 On 29 April, Russia's Finance Ministry said that it made an attempt to repay US$649.2 million on Russia-2022 and Russia-2042 Eurobonds (in dollars through non-sanctioned Bank Dom.RF JSC  to Bank of New York Mellon Corp. and then to Citibank N.A., London branch, but it was not clear if the payments would reach the recipients and Russia would avoid default.

On 4 May, US and UK regulators cleared the payments with a technical date of 2 May

Five days before the May 25 license expired, Russia again managed to pay on Russia-2026 and Russia-2036 Eurobonds and again avoided falling into the grace period. The next payments after the 27 May one were $235 million across two Eurobonds due on June 23.

At the end of May, it turned out that the 30-day grace period still required interest to be paid, which means that the money paid on 29 April (and got into Citibank N.A. on 2 May) was not enough by ~1.9 million $USD and the technical default from 4 April was converted into a real default, as recognized on 1 June by CDDS, when 13 members voted, only one of them (Citibank N.A.) voting in favour of Russia

A default for the purposes of CDS contracts “occurs once the determination committee votes for a credit event, which has now happened,” said Gabriele Foa, portfolio manager of the Global Credit Opportunities Fund at Algebris.“Of course…it is a very small amount, so the definition of default is very technical. If, as it seems, it is not possible for foreign investors to receive dollars starting May 25, the default will soon be more material.”

On Monday 27 June 2022, Moody's rating agency declared that Russia defaulted on its foreign debt after missing a payment deadline the preceding Sunday.

The following table includes actual sovereign defaults and debt restructuring of independent countries since 1557 for the same click here.

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