The West is pushing Russia to default on its first foreign debt since 1918

New York / London (CNN Business) – For the first time since the Bolshevik Revolution a century ago, Russia has not repaid its foreign debt.

The White House said on Sunday that Moscow had defaulted on the strength of Western sanctions imposed on Russia since its occupation of Ukraine, following reports that Moscow had failed to pay about $ 100 million in interest on two bonds during its 30-day deadline.

“This morning’s news of Russia’s failure to pay for the first time in a century underscores how strong the reaction of the United States, along with its allies and partners, has been to its dramatic impact on Russia’s economy,” said a senior executive on the sidelines of the G7 summit in Germany.

On May 27, Russia denied the balance, saying it had been paid in dollars and euros and that the money was stashed away at a Belgian-based euroclear company.

The historically significant default was widely expected after the US Treasury ended the embargo that allowed US bondholders, after halving Russia’s foreign exchange reserves.

The European Union (EU) has made it difficult for Moscow to meet its debt obligations earlier this month by allowing Russia’s National Settlement Depository, Russia’s agent for foreign currency.

However, it took longer than many expected: sanctions have failed to cripple the Russian economy as rising energy prices have filled the country’s coffers.

Meanwhile, the Russian currency has risen to reach levels Rose to a seven-year high against the US dollar.

The country was able to pay off lenders with dollars in April, which put it on the brink of default after a long series. The country’s finance ministry said in April it had paid $ 565 million in eurobonds this year and $ 84 million in 2024. Both payments were made in dollars, the finance ministry said. Of the bond agreement.

But based on recent moves by US and EU officials this time it is not possible.

The state-run Ria Novosti news agency quoted Russian Finance Minister Silvanov last week as saying that sanctions meant that Moscow had “no other means of obtaining funds for investors other than to pay in Russian rubles.”

Russia’s Finance Ministry said in a telegram on May 27 that it had paid $ 71 million and .5 26.5 million for the Russian national settlement.

During a regular call with reporters on Monday, the Kremlin’s spokesman Dmitry Peskov said, “The allegations of non-payment are false because the required foreign exchange payments were already made in May.

“It is not our problem,” he said, adding that the money transferred to Euroglyre was not released to investors.
“So there’s no reason to call it default,” he said.

No securities subject to Euroclear sanctions can be settled with the opposing parties.

Since 2014, the Kremlin has amassed about $ 640 billion in foreign reserves, the last time the West allowed Russia to annex Crimea. Half of those funds are now frozen under Western sanctions imposed after the invasion of Ukraine.

As the country can no longer borrow abroad and the value of its current securities has fallen to pennies in dollars, it is unclear what effect the default will have on the Russian economy in the short term.

But in the long run, the Russians will definitely suffer. The attack on Ukraine has left the country with some friends in the international community, and the default is likely to cut off access to foreign funding for years.

CNN’s Claire Sebastian and Phil Mattingly contributed to this report.