The effect of various sanctions on Russia for its invasion of Ukraine has been relatively limited as the conflict has lingered. Now it appears the sanctions are beginning to take a toll.
After the U.S. Treasury blocked Russia’s access to dollars held in American banks on Monday, Russia’s finance ministry said Wednesday that it had used rubles to pay the $650m in dollar-denominated debt obligations. But credit rating agencies have indicated that payments in a currency different from the one in which the debt was sold would count as a default once the grace period expired.
Did that happen in this case?
Russia said it had transferred the debt payments to the country’s National Settlement Depository in rubles, and considered its obligations fulfilled “in full.” The U.S. government had been allowing Moscow to avoid default on its foreign currency government bonds by paying the debt in dollars.
The Biden administration tightened its sanctions amid growing calls for President Putin to face a “war crime trial” for atrocities in Ukraine. Russia’s debt payments that were due Monday have a 30-day grace period and no provision for repayment in any currency other than dollars. This could be Russia’s first default on foreign currency debt in more than a century.