The statement is one of the most egregious repercussions of Moscow’s exile from the Western banking system since President Vladimir Putin’s invasion of Ukraine. If Moscow is declared in default, it will be the country’s first substantial default on foreign bonds since the years after the 1917 Bolshevik revolution, while the Kremlin claims the West is pushing a default through severe sanctions.
According to the agency, Russia paid payments on two bonds in rubles rather than US dollars, which violated the conditions of the bond contracts.
“The bond contracts contain no provision for repayment in any currency other than dollars,” the ratings agency stated in a statement.
The payments represent “a change in payment conditions related to the original bond contracts and hence may be regarded a default under Moody’s definition if not rectified by May 4, which is the end of the grace period,” according to a news statement from Moody’s.
The bonds in question are set to maturity in 2022 and 2042, respectively.
While certain bonds issued after 2018 allow for payments in rubles under certain conditions, those issued before, notably those expiring between 2022 and 2042, do not.
Last week, Russia’s finance ministry stated that it attempted to make a $649 million payment toward two bonds to a US bank, but the payment was rejected due to sanctions.
Russia has indicated that it is still prepared to pay its bills, but has warned that it will do so in rubles if its foreign currency accounts are stopped.
Finance Minister Anton Siluanov has warned that if Russia is forced to default on its national debt, it will take legal action.
Russia has stated that any default would be “artificial,” owing to the immobilisation of its foreign-currency reserves as a result of the sanctions, and has claimed that payments in rubles should be an acceptable option.
Since the Bolshevik Revolution of 1917, when the Soviet Union arose and renounced the previous Tsarist government’s obligations, Russia has not defaulted on international debt.
