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Moody’s accuses Russia of defaulting

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Status: 06/28/2022 11:21 a.m.

US rating agency Moody’s has determined that Russia has defaulted on interest payments to foreign creditors. This is the first default on Russia’s foreign debt since 1918.

Officially, Moody’s is no longer allowed to assess Russia’s creditworthiness because of the sanctions. Nonetheless, the US rating agency determined that Russia defaulted on Tuesday night. At the end of Monday’s payment deadline, investors in two bonds would not have received payments totaling $100 million, Moody’s said Tuesday evening. “We classify this as a defect according to our definition.”

Further defaults due are “likely”, Moody’s said. This is Russia’s first default on its foreign currency sovereign debt in over 100 years.

The Russian Finance Ministry, meanwhile, explained that interest payments were blocked due to sanctions and therefore did not reach creditors in time. The fact that investors no longer received any money is not the result of a default, but is due to “third-party actions”.

Sanctions block payments

Russia has been largely cut off from the international financial system by the sanctions imposed for its war of aggression against Ukraine. In particular, the blocking of Russian foreign accounts makes it considerably more difficult to repay debts. Moscow therefore accuses the West of wanting to force the country into artificially induced insolvency.

In the spring, the major rating agencies S&P, Moody’s and Fitch stopped rating Russia’s creditworthiness. European Union sanctions, which aim to weaken the viability of Russia’s capital market, have barred agencies from assessing Russia’s creditworthiness in the future.

In the financial markets, the occurrence of a default due to Western sanctions was widely expected. The ruble was only slightly down against the dollar this morning.

Source www.tagesschau.de

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