S&P downgrade indicates Russia headed for historic default

BOSTON (AP) — The credit ratings agency Standard & Poor's has downgraded its assessment of Russia's ability to repay foreign debt, signalling rising prospects that Moscow will soon default on external loans for the first time in more than a century.

S&P Global Ratings issued the downgrade to “selective default” late Friday after Russia arranged to make foreign bond payments in rubles on Monday when they were due in dollars.

It said it didn't expect Russia to be able to convert the rubles into dollars within the 30-day grace period allowed.

S&P said in a statement that its decision was based partly on its opinion that sanctions on Russia over its invasion of Ukraine “are likely to be further increased in the coming weeks, hampering Russia's willingness and technical abilities to honour the terms and conditions of its obligations to foreign debtholders.”

An S&P spokesperson said a selective default rating is when a lender defaults on a specific payment but makes others on time.

While Russia has signalled that it remains willing to pay its debts, the Kremlin also has warned that it would do so in rubles if its overseas accounts in foreign currencies remain frozen.

Tightened sanctions placed on Russia this week after evidence of alleged war crimes — the killing of civilians in the town of Bucha during Russian military occupation — barred it from using any foreign reserves held in US banks for debt payments.

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