BOSTON (AP) – Rating agency Standard & Poor’s has downgraded its assessment of Russia’s ability to repay its external debt, signaling the prospect that Moscow will soon default for the first time in more than a century.
S&P Global Ratings downgraded its rating to selective default late Friday after Russia agreed Monday to pay its foreign debt in rubles despite the debt being in dollars. He said he does not expect Russia to be able to exchange the rubles for dollars within the allowed 30-day grace period.
S&P said in a statement that its decision was based in part on its view that sanctions against Russia over its invasion of Ukraine “will almost certainly increase in the coming weeks, damaging Russia’s willingness and technical ability to comply.” “. the terms of its obligations to foreign creditors”.
Although Russia has indicated it remains ready to pay its debts, the Kremlin also warned against doing so in rubles if its foreign currency accounts remain frozen in foreign accounts.
The toughest sanctions imposed on Russia this week after evidence of war crimes emerged – the massacre of civilians in the city of Bucha during Russian military occupation – prevented it from using its foreign exchange reserves in US banks to pay off debts.
Russia’s Treasury Ministry said on Wednesday it tried to make a $649 million payment for two bonds to an unnamed US bank, but new sanctions prevented the payment from being accepted, so it was made in rubles.
Western sanctions have weighed heavily on Russia’s economy, and S&P and other credit rating agencies had downgraded their debt status to ‘junk’ as a default was very likely.
Russia has used strict capital controls and other crackdowns and revenues from oil and gas sales to artificially support the ruble.
The country has not defaulted on its external debt payments since the 1917 Bolshevik Revolution, when the Soviet Union was formed. Even in the late 1990s, after the dissolution of the Soviet Union, Russia was able to continue paying its debts with international help. However, if you have defaulted on your internal debt.
Source: Associated Press