S&P says Russia defaulted on its foreign debt

Russia defaulted on its foreign debt after offering bondholders payments in rubles, not dollars, the credit rating agency said. S&P.

Russia tried to pay in rubles two dollar-denominated bonds that matured on April 4, S&P said in a note on Friday. The agency said this amounts to a “selective default” because investors are unlikely to be able to convert rubles into “dollars equivalent to amounts originally owed.”

Moscow has a 30-day grace period from April 4 to make principal and interest payments, but S&P said it does not expect to convert them into dollars due to Western sanctions that undermine its “will and technical ability to honor the terms and conditions of its obligations”.

Russia is unable to access some $315 billion of its foreign currency reserves as a result of Western sanctions imposed after the invasion of Ukraine.

Until last week, the United States allowed Russia to use some of its frozen assets to pay certain investors in dollars. But the US Treasury has since blocked the country from accessing its reserves in US banks.

Kremlin spokesman Dmitry Peskov told a news conference last week that any default would be “artificial” because Russia has dollars to pay — it simply cannot access them.

“There is no reason for a real default,” Peskov said.

David Goldman contributed to this story.