Russia’s repayment of foreign currency bonds in rubles could be considered a default if it doesn’t change course and pay in dollars, Moody’s rating agency said Thursday.
Moody’s warning comes as Russia approaches its first failure to pay off foreign debt since the Bolshevik Revolution of 1917, as President Vladimir V. Putin faces sanctions imposed by the United States and its allies in Europe and Asia in response to the Russian invasion of Ukraine.
Moody’s said Russia has until May 4, when the grace period ends, to make dollar payments and avoid default on two bonds maturing in 2022 and 2042. The payment terms of the original bond contracts required dollars, not a stipulation. to allow for another currency.
“Moody’s view is that investors have not received the contractual foreign currency promise by the payment due date,” the rating agency said.
Earlier this week, S&P Global placed Russia under a “selective default” rating after the Russian government last week said it had repaid about $650 million in ruble-denominated debt.
Russia has said any default would be “artificial” as its foreign exchange reserves have been immobilized by the sanctions, arguing that payments in rubles should be a suitable alternative.
