The Russian finance ministry has said it will initiate legal action if the country is 'forced' into a default on its sovereign debt. Finance Minister Anton Siluanov said the country will certainly sue the detractors since Moscow is sure that it has taken "all the necessary steps to ensure that investors receive their payments."
"We will present in court our bills confirming our efforts to pay both in foreign currency and in roubles. It will not be an easy process. We will have to very actively prove our case, despite all the difficulties," Siluanov told reporters on Monday, according to Reuters.
Russia was forced to make an international bond repayment in roubles instead of dollars last week, the first time ever the country defaulted on debt in more than a century.
What's Russia's Charge?
Russia has put the blame on the West, saying the western bloc deliberately pushed Moscow into debt default. "Russia tried in good faith to pay off external creditors ... Nevertheless, the deliberate policy of Western countries is to artificially create a man-made default by all means," Siluanov said.
The debt default happened after Washington blocked the Russian government from paying holders of its sovereign debt.
The US Role
The US had frozen foreign currency reserves held by the Russian central bank at U.S. financial institutions as part of the sanctions imposed on Moscow after the Ukraine war started. However, the Treasury Department had allowed the Russian government to use the funds to make coupon payments on dollar-denominated sovereign debt on a case-by-case basis, Reuters reported.
However, this was stopped last week, when a large tranche of such payment came up, including a $552.4 million principal payment on a maturing bond.
Is a Russian Fightback Possible?
As Siluanov says clearly, the legal fight will be painstaking. In making the legal challenge Russia has solidified its resoluteness to fight the Western dominance. However, the verbal escalation apart, the prognosis is negative for Moscow in the near term.
On Friday, rating agency S&P Global downgraded Russia's foreign currency payments to a 'selective default'.
"We currently don't expect that investors will be able to convert those ruble payments into dollars equivalent to the originally due amounts, or that the government will convert those payments within a 30-day grace period," S&P Global said.
A Russian default was unthinkable before the start of the war. Russia was rated as investment grade before the Ukraine war started.
Now, the ratings agencies are of the view that the western sanctions against Moscow will get tighter in the upcoming weeks. And this is more likely than not to hamper "Russia's willingness and technical abilities to honor the terms and conditions of its obligations to foreign debtholders."