Bloomberg: Russia is on the verge of the first default in the century due to foreign debt

Anna Kholodnova

Russiaʼs first external default in a century seems almost inevitable. It is suggested almost a 90% chance that default will happen this year, according to the latest figures from ICE Data Services.

This was reported by Bloomberg.

The Treasury halted dollar debt payments from Russiaʼs accounts in the US banks. And when attempts to pay in hard currency were blocked, Russia violated the terms on two bonds by paying investors rubles instead of dollars.

Meanwhile, S&P downgraded Russiaʼs ratings to "selective default" yesterday. The financial world is waiting for an official decision on whether there is a default in Russia.

But it is unclear where this decision will come from. Rating companies refuse to cover Russiaʼs situation due to the EU ban. Moodyʼs Investors Service and Fitch Ratings have already withdrawn from the country, and S&P Global has announced that it will withdraw its ratings from April 15.

Despite oil and fuel exports, Russiaʼs rapid economic recovery will no longer be due to sanctions.

"Putin has crossed the rubicon with his actions in Ukraine. Russia will be in default for perhaps a decade. That means no access to international capital markets, very high costs of borrowing even from the Chinese, no investment, no growth, low living standards. It’s a terrible outlook for Russia and Russians", said Tim Ash, an emerging-markets strategist at Bluebay Asset Management.

The last default in Russia was in 1998 but on domestic debt. The last default due to foreign debt occurred after the 1917 revolution.