Russia pulled an unexpected trick last Friday. After several weeks of criticism of the sanctions, she unexpectedly announced that she would pay $649 million to the holders of her bonds, which should have been done on April 4.

No one expected that Moscow would try to prevent a formal default in the last days of the grace period. And that's putting it mildly, writes the Financial Times.. Journalists from world economic publications have already prepared articles about the Russian default, which was supposed to formally occur on May 4. However, the Financial Times journalists asked Lee Bachgate, an expert on such cases, about Russia's debt future.. He explained that on Wednesday the country could still suffer a default..

Russian debt repayment surprised investors because the US Treasury did not allow Moscow to use its frozen reserves for this. The Russian government has clearly stated that it is going to pay off creditors in rubles. Previously, the US Treasury's Foreign Assets Control Service allowed certain payments to be made from frozen Russian accounts.. But then she stepped up her policy. Only non-frozen dollars in Russia could be used to pay off the public debt. And this would mean an outflow of currency from the country.

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In fact, US officials confirmed that the Russian bond payment was made using dollars held in Russia itself.. This means that this currency can no longer be used to finance the war against Ukraine.. The transaction was not authorized by US officials. However, she did not formally violate the sanctions regime.. But according to experts, Russia "

Bachgate points to the fact that London-based Citi bank acted as a " According to the expert, the bank will hold the money and not send it to the owners of the Russian debt until it receives a clear " In turn, the service, before giving the necessary permissions, will check whether all the money really comes from non-frozen accounts. And Batchgate doubts that this work will be completed by Wednesday, when the grace period expires..

Fiscal or paying agent represents Russia, not bondholders. Legal analysis could have been very different if Moscow had used a trust structure. In other words, since Citi formally acts on behalf of Moscow and not its creditors, placing money in a bank account is not enough to be considered a fulfillment of financial obligations.. And that means it's time to say hello to the first Russian default since 1998.

Of course it won't last long.. Because Citi will get permission from US regulators to distribute money to Russia's creditors. In turn, the owners of the Russian debt will also not run to the courts, knowing that they will receive the promised amounts in the coming days.. Therefore, despite the expectations of buyers and sellers of credit default swaps, the practical consequences of a Russian default will be very limited.. For now.

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It is also a fact that the United States seeks a Russian default no less than Russia tries to avoid it.. This means that US regulators can step up their policy that will not allow Russia to service its debts even with the help of unfrozen accounts.. For example, American organizations may be banned from receiving any Russian money.. Bachgate believes that such an approach would be correct.. Since " However, even if regulators maintain a loophole that allows Moscow to service debts with the help of foreign exchange reserves on Russian territory, according to the expert, Russia's default is still inevitable..

Recall that the pre-default situation in Russia had already developed as of March 16, when preliminary payments were made on external debt obligations.

Given the sanctions, experts expressed doubts that the Russian Federation would be able to make these payments in dollars.. However, at the last moment, Russia found the required amount and made payments in dollars..

At the same time, experts postponed a possible default of the country to April 4, calling the upcoming payments unlikely..

The April 4 non-payment of dollar debt triggered a grace period of 30 days, after which a default will set in, cutting off Russia, already cut off from financial markets, until lawsuits and payments are completed.