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Russia defaults on international debt, Kremlin fights designation

Kremlin spokesman Dmitry Peskov attends a meeting at the Kremlin in Moscow on April 27, 2017. He said Russia has tried to pay its international debt but is being blocked by Western sanctions. File Photo by Sergei Karpukhin/EPA
Kremlin spokesman Dmitry Peskov attends a meeting at the Kremlin in Moscow on April 27, 2017. He said Russia has tried to pay its international debt but is being blocked by Western sanctions. File Photo by Sergei Karpukhin/EPA

June 27 (UPI) -- The Russian government officially missed bond payments on international debt for the first time in a century on Sunday because of Western sanctions that limited access to the global capital markets.

Moscow's struggles now threaten it's bond ratings, but Russian officials charge that the default was induced by the United States and allies cutting it off from the market. The Kremlin has been slammed with economic sanctions since its invasion of Ukraine in late February.

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Investors failed to receive from Russia about $100 million in dollar- and euro-denominated interest payments due to them within a 30-day grace period following a missed May 27 deadline.

A formal declaration on default would still need to be made and the Credit Derivatives Determinations Committee, the organization that rules on securities linked to defaults, has not been asked to rule on Russia's dilemma, according to The New York Times.

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Kremlin spokesman Dmitry Peskov told reporters Russia has tried to make the payments but Western sanctions blocked them.

Because of the war in Ukraine, Russia has been excluded from the global financial system, but it has managed to find ways to get payments to bondholders on multiple occasions.

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Russian Finance Minister Anton Siluanov said earlier this month that Moscow wired $100 million in rubles to its domestic settlement house in an attempt to get around sanctions.

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The bonds in question, though, are not subject to a ruble clause that would allow payment in the domestic currency to be converted overseas.

Siluanov claimed blockage of payments caused by sanctions does not constitute a genuine default because of Russia's unwillingness or inability to pay, calling the default designation a "farce," according to CNBC.

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