Russia has defaulted on its foreign debt, Moody's Investors Service Inc. said Monday, as international sanctions have shut the country out of global financial transactions over its invasion of Ukraine.
While Russia has denied having defaulted, the determination by the major U.S. credit rating agency that the country had missed coupon payment to holders of its bonds worth $100 million during a grace period is expected to have a long-term impact on its ability to raise funds in foreign currencies.
According to the White House, Russia has defaulted on its debt for the first time in more than a century.
Moody's said in a statement on Monday that Russia missed the coupon payment by the Sunday end of a 30-day grace period from its date of expiry in late May.
Russia argued it paid its overdue interest, but the rating company said it did not go through to its bondholders by the final deadline. Moody's said it considers that "an event of default under our definition."
The default comes as the Group of Seven countries including Japan have stepped up economic pressure on Russia after its military invaded Ukraine on Feb. 24. In March, they excluded some major Russian lenders from a key international payment network known as SWIFT, disrupting the country's trade and money transfers.
"This morning's news around the finding of Russia's default for the first time in more than a century situates just how strong the reactions are that the U.S., along with allies and partners, have taken, as well as how dramatic the input, the impact has been on Russia's economy," a senior U.S. government official said Monday.
The rating agency in March cut Russia's sovereign debt rating to Ca, its second-lowest grade, following the war in Ukraine. It later withdrew credit ratings on Russia altogether.
"Further defaults on future coupon payments are likely," the company said.
Meanwhile, Russia has not admitted it defaulted, saying it has a will and ability to pay back its debt.
"It was to be expected," said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo. "Bondholders have already started writing off losses so there won't be much room for additional write-offs."