Moody’s gives Russia an ultimatum; You have 3 weeks to pay off the debt

On Thursday, Moody’s Investment Service confirmed that Russia “could be considered in default” if it does not pay two dollar installments before the grace period expires on May 4.

For several weeks, Russia managed to avoid the risk of default despite sanctions imposed on it for invading Ukraine because the US Treasury allowed foreign currency held by Moscow abroad to be used to pay off foreign debts.

But the United States has tightened sanctions and is no longer accepting Moscow dollars in American banks.

The Russian Finance Ministry announced in early April that it had paid off debts of about $650 million (600 million euros) in rubles.

Moody’s said in a statement that the April 4 payment for two bonds maturing in 2022 and 2042, in rubles rather than US dollars, “changes the payment terms of the original contracts, and thus could be considered a default.” “” If Moscow does not repay this debt before May 4.

Moody’s added that the bond contracts do not provide for any payment in a currency other than the dollar.

Although Eurobonds issued after 2018 allow, under certain conditions, payment in rubles, those issued before 2018 (including 2022 and 2042 bonds) do not have this alternative currency requirement or only allow payment in other hard currencies (dollars). or euro, sterling or swiss (franc), agency details.

On April 9, the financial rating agency S&P Global Ratings had already announced that it had lowered Russia’s rating on its foreign currency payments to the level of “selective default”, precisely because Moscow had repaid debts cited by Moody’s in rubles.

A country is considered in default when it cannot meet its financial obligations to its creditors, who may be countries, financial institutions (the International Monetary Fund or the World Bank, among others) or investors in financial markets.

It is partial or selective when the state pays part of its obligations.

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