Russia has defaulted on its foreign debts for the first time in a century, in a humiliating blow to Vladimir Putin that further freezes his country out of the Western financial system.
After narrowly swerving non-payment several times since launching an invasion of Ukraine in late February, Moscow failed to pay $100m of coupons on bonds due last month, for which a 30-day grace period ended on Sunday.
Payment had been rendered practically impossible after the White House moved to block channels to creditors in the West, meaning Russia could not settle its debts despite the means and willingness to do so.
The default – the first time Russia has failed to make payments to international bondholders since the Bolshevik revolution in 1918 – is mainly a symbolic event for now: Russia is already a pariah within the Western financial system and is unlikely to tap international markets for money in the near future.
But it will further tie Mr Putin’s hands as the country suffers its biggest economic shock in years, and could starve Russian companies of future funding options if the contagion spreads to corporate bonds.
The country previously defaulted on its domestic debt in 1998 as it underwent a post-Soviet economic transformation.
Russia has claimed the default is a sham artificially engineered by the US. It said last week that it would service its debt with roubles, a move that creditors have already ruled out. Anton Siluanov, the finance minister, has called the situation a “farce”.
He said: “Anyone can declare whatever they like.
“But anyone who understands what’s going on knows that this is in no way a default.”
Ordinarily, a default would be declared by one of Wall Street’s ratings companies, likely S&P, Fitch or Moody’s. But European Union sanctions have forced the firms to withdraw their coverage of Russia.
However, the bonds on which the payment was missed allow their holders to declare a default if 25pc agree non-payment has occurred. Documents attached to the debt instruments give three years for a claim to occur – meaning some investors may wait to see whether Russia is rehabilitated into the global financial system during that time.
If they do take action, doing so through the legal system could prove difficult because Moscow has said it will reject the jurisdiction of any foreign court.
Foreigners held about $20bn of Russian eurobonds at the start of April. Several payment deadlines have now passed, including on Thursday and Friday of last week, so it is possible Russia will soon be deemed to have defaulted on multiple debts.