Russia unable to repay its debt: 100 million dollars in interest

For the first time since the Bolshevik revolution, Russia is unable to pay its foreign debt. Moody's, a British rating agency, confirmed in a report that Moscow has defaulted on approximately $100 million in interest payments on two bonds that expired on Sunday 26 June. The Kremlin has denied this. 

Russia's inability to repay its foreign debt is said to be a consequence of the harsh economic and financial sanctions that have weighed on the country since its invasion of Ukraine. In addition to military and intelligence support for Ukraine, sanctions are the main weapon that the European Union and the United States, leading the Western bloc, have used against Vladimir Putin's government.

Russia has been on the verge of default almost since the beginning of the war and sanctions, according to ratings from S&P, Fitch and Moody's agencies. 

Coinciding with the G7 meeting, which again addressed the war in Ukraine, the White House announced that it plans to continue intensifying this same policy of economic siege against Russia in order to boost its military capacity in Ukraine. 

Nevertheless, the Russian economy remains afloat thanks to its alternative partners, in addition to the rise in the price of hydrocarbons, one of Moscow's star exports, which has found customers outside the European Union and the United States. 

The Russian government said in a statement that this situation is not due to non-payment, but to a blockage in the transaction. "The non-receipt of money by investors is not the result of non-payment, but is caused by the action of third parties, which is not directly considered [...] as a case of non-payment", reads the message of the Ministry of Finance.
 
The default may create problems for Russia in the short term in terms of borrowing from international financial institutions. After this experience, it can be expected that the European and North American financial markets will be virtually closed to Russia, and Russia will look to China or India for solutions.  These same markets could expose themselves to additional sanctions from the US or the EU if they were to provide financial assistance to the Russian economy. 

Timothy Ash, a market expert consulted by the American channel CNBC, fears that although this situation will not have a strong impact on Russia, the Russian state could be harmed by the fall in the value of these Eurobonds. It will also mean a considerable increase in Russia's financing, through much higher interest rates on loans. In this situation, the US would have the advantage of being able to loosen or not loosen the situation by allowing bondholders to negotiate terms with Russia's foreign creditors. 

Economic sanctions against Russia have been questioned numerous times by the international community or experts. Spanish diplomatic sources claim that sanctions today, in most scenarios in which they are applied, 'only harm the population of the target country, without greatly damaging the country's power'.