Russia, Foreign Debt Defaulter For The First Time Since 1918

Russia has for the first time since 1918, defaulted on its foreign currency sovereign debt

Under the culmination of many of the most tough sanctions observed by the country from the Western Nations.

Routes to Russia for foreign payments to the overseas creditors have further shutdown for all the overseas creditors. All due to the Kremlin's invasion of Ukraine

This Sunday, however, the grace period of Moscow was put to an end. About $100 million of interest payments due May 27 have expired already.

This deadline, if missed, is considered to be a major default event. As the country's grappling Eurobounds have traded at extremely distressed levels.

Since the beginning of March, foreign reserves of the central bank have frozened. Due to severing of financial systems from some of the biggest global financial systems so far.

Worst case scenario is that the Russians are already dealing with double digit inflation followed by the worst economic contractions.

However, it considers the West to have artificially manufactured such a situation upon the state.

With the final deadline passed, focus should rather be shifted to what investors should do next.

They may not be needed to act immediately in recklessness. Rather they may choose to monitor war's progress.

See for a hope for sanctions to eventually be softened. Time may be on their side.The claims only become void three years on from the payment date, as per the bond documents.

"Most bondholders will have to keep a wait-and-see approach,” Takahide Kiuchi, economist from Nomura Research Institute in Tokyo, Japan stated.

Russia's default tussle with its bondholders has only just started yet.

History suggests during Russia's financial crisis alongwith ruble collapse of 1998, Former President Boris Yeltsin's government defaulted on $40 billion of its local debt.

It is almost after a century that the country observes a similar kind of situation.

Picture Source: Reuters