This situation does not imply a legal default status for Russia because the rating agencies can no longer rate that country due to the international sanctions imposed against Moscow for the invasion of Ukraine.
Now it is up to a committee of creditors, the Credit Derivatives Determination Committee (CDDC), to assess whether or not Russia defaults on payments. As it has not yet ruled on the matter, the situation remains unclear.
Moscow reacted on Tuesday and invited the agency to “explain itself.”
“As for Moody’s, they recently decided not to take our country into account, they refused to rate our country. Does this mean that Moody’s has resumed the rating process?” Kremlin spokesman Dmitri Peskov said.
Russia was due to pay $100 million in interest on its debt on May 27, a deadline with a one-month grace period that expired on Sunday.
The Russian Finance Ministry claimed to have paid the money in foreign currency as early as May 20. But he admitted on Monday that the money had not reached creditors, because banking intermediaries blocked payments due to sanctions imposed by Western countries as a result of the war in Ukraine.
Russia assured on Monday that “the non-obtaining of the money by the investors is not the result of the fact that there has not been a payment, but is caused by the action of third parties, something that is not directly considered. […] as a case of non-payment”.
The United States has prohibited Moscow from paying its debts in dollars since the end of May.
However, some European bonds, issued before 2018, “do not contain a clause” allowing Russia to “repay them in rubles,” Moody’s said in its statement.
The precedent of 1998
The CDDC had recorded in early June the non-payment by Moscow of 1.9 million dollars of default interest on a previous due date.
Now it plans to meet on Wednesday afternoon to discuss the unfulfilled deadline of May 27
This committee will also decide whether to activate the CDS (Credit Default Swap), financial products that serve as insurance against non-payment of a debt.
But, in fact, Russia clearly has the means to repay the interest on its foreign debt, whether in dollars or euros, financial analysts point out.
In 1998, Russia had decreed a unilateral moratorium on the payment of its foreign debt after having devalued the ruble, and renounced meeting its maturities with its creditors.
But Moscow then managed to renegotiate the maturity schedule with its main creditors, thus avoiding being declared in ‘default’
Therefore, Russia has not defaulted since 1918, during the start of the Russian revolution.
