Russia faces once-unthinkable default on its sovereign debt this week  

Default is 'quite imminent', according to a top analyst at S&P Global

The Kremlin is facing a Wednesday payment deadline. File Picture

The cost of Russia's invasion of Ukraine will become a lot clearer this week, with a previously unthinkable sovereign default looming, more emergency central bank measures likely, and a Russian stock market crash guaranteed if it reopens.

Moscow's "special operation" in its former Soviet neighbour has cut Russia off from key parts of the global financial markets by the West, triggering its worst economic crisis since the 1991 fall of the Soviet Union.

Wednesday could mark another low. The Russian government is due to pay $117m (€107m) on two of its dollar-denominated bonds. But it has been signalling it will not, or if it does it will be in roubles, tantamount to a default. 

Technically it has a 30-day grace period, but that is a minor point. If it happens, it would represent its first international default since the Bolshevik revolution over a century ago.

"Default is quite imminent," said Roberto Sifon a top analyst at S&P Global which has just hit Russia with the world's largest-ever sovereign credit rating downgrade. 

The fact that state-run energy giants Gazprom and Rosneft have made international bond payments in recent days and around $200bn of still-unsanctioned Russian government reserves does leave a sliver of hope that default might not happen, though those odds look grim.

Wednesday could be busy for other reasons as well. Russia's Vedomosti financial newspaper reported central bank and Moscow Exchange sources as saying this week that suspended local equity and bond trading could resume by then. 

It would be chaotic, at least in the short term. Russia's big firms which are also listed on the London and New York markets have seen those international shares slump virtually to zero when the crisis broke out and have now been stopped. 

Rabobank currency strategist Jane Foley said:

There are many financial institutions that are sitting on Russian assets that they want to get rid of but they can't. 

"They have no real option but to sit on them. But that means that when they are allowed to trade, the selling could be quite persistent." 

It will not finish there. Russia's central bank is scheduled to meet on Friday having already more than doubled interest rates to 20% and brought in widespread capital controls in an effort to prevent a full-blown financial crisis.

Bloomberg