Russia in Debt Default as Payment Deadline Passes

Russia is believed to have gone into debt default for the first time since 1998 after failing to meet a key deadline. Russia has the funds to make a $100 million payment due on Sunday, but sanctions have made it impossible to transfer the funds to international creditors.

The Kremlin was determined to avoid the default, which would be a major blow to the country's reputation. Russia's finance minister called the situation "a farce," and it is unlikely to have an immediate impact.

According to Chris Weafer, chief executive of Moscow-based consultancy Macro Advisory, this is because Russia does not need to raise money internationally because it earns money from high-priced commodities such as oil.

"This is the sort of action that will hang over the economy and make recovery much more difficult when we get to that stage," he said.

The $100 million interest payment was due on May 27. According to Russia, the funds were transferred to Euroclear, a bank that would then distribute the funds to investors. However, according to Bloomberg News, that payment is still stuck there, and creditors have not received it. Meanwhile, according to two sources cited by Reuters, some Taiwanese holders of Russian bonds denominated in euros have not received interest payments.