Russia tried to pay in rubles for two dollar-denominated bonds that expired on April 4, S&P said in a note on Friday.  The agency said this amounted to “selective default” because investors were unlikely to be able to convert the rubles into “dollars equivalent to the amounts originally owed”.
According to S&P, a selective default is stated when an entity has defaulted on a specific obligation but not all of its debt.
Moscow has a 30-day grace period from April 4 to make capital and interest payments, but S&P said it did not expect to convert them into dollars because of Western sanctions undermining its “willingness and technical ability to comply.” the terms and conditions’ of its obligations.
A full-fledged foreign currency bankruptcy would be Russia’s first in more than a century, when Bolshevik leader Vladimir Lenin rejected bonds issued by the tsarist government.
Russia has no access to some $ 315 billion in foreign exchange reserves as a result of Western sanctions imposed after its invasion of Ukraine.  Until last week, the United States allowed Russia to use some of its frozen assets to repay some investors in dollars.  But the US Treasury Department has since barred the country from gaining access to its reserves in US banks, as part of an effort to increase pressure on Russian President Vladimir Putin and further reduce the burden of war.
JPMorgan estimates that Russia owed about $ 40 billion in foreign currency at the end of last year, about half of which was held by foreign investors.


MOSCOW GETS READY TO GO TO COURT 
Russia is now planning legal action.
“We will sue because we took all the necessary steps to get investors to receive their payments,” Finance Minister Anton Siluanov told the pro-Kremlin newspaper Izvestia on Monday.
“We will show the court the proof of our payments, to confirm our efforts to pay in rubles, as we did in foreign currency. It will not be a simple process,” he added.  He did not say who Russia was planning to sue.
Kremlin spokesman Dmitry Peshkov told a news conference last week that any bankruptcy would be “artificial” because Russia has the dollars to pay – it simply cannot access them.
“There is no reason for real bankruptcy,” Peshkov said.  “It’s not even close.”
Russia has made every effort to artificially support the ruble – which sank by as much as 40 percent to less than a US cent in the days after the invasion – including raising interest rates to 20 percent and forcing exporters to trade most of their income in foreign currency in rubles.
The measure remains in place, but the central bank has decided to ease some other restrictions, Reuters reported on Monday and announced last week that it was cutting interest rates to 17%.
The ruble was trading at 79 US dollars on Monday, according to Refinitiv.  This is about five percent weaker than Saturday.
– 
David Goldman and Chris Liakos contributed to the report


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