Russia is now exposed to a historic debt default: Here’s what happens next

Russia is now exposed to a historic debt default: Here’s what happens next

The U.S. has announced that it will not extend an exemption permitting Moscow to pay foreign debt to American investors in U.S. dollars, potentially forcing Russia into default. Up until Wednesday, the U.S. Treasury Department had granted a key exemption to sanctions on Russia's central bank that in dollars through U.S. and international banks, on a case-by-case basis. This had , though forced it to tap into its accumulated war chest of foreign currency reserves in order to make payments. However, the Treasury Department's Office of Foreign Assets Control has allowed the exemption to expire as of 12:01 a.m. ET on Wednesday, it was . Russia has built up substantial foreign currency reserves in recent years and has the funds to pay, so will likely contest any declaration of default on the grounds that it attempted payment but was blocked by the tightened sanctions regime. Moscow has a deluge of debt service deadlines coming up this year, the first being on Friday, when 100 million euros in interest is due on two bonds, one of which requires dollar, euro, pound or Swiss franc payment while the other can be serviced in rubles. Reuters and the Wall Street Journal reported Friday