The historic default follows a series of unprecedented Western sanctions that have increasingly isolated Russia from the global financial system following its invasion of Ukraine. Russia lost the last avenue to service its foreign-currency loans after the United States removed an exemption last month that allowed US investors to receive Moscow’s payments.

“On 27 June, holders of Russia’s sovereign debt had not received coupon payments on two eurobonds worth $100 million by the time the 30-calendar-day grace period expired, which we consider an event of default under our definition,” Moody’s said.

Moscow said Monday there were “no grounds to call this situation a default” as the payments did not reach creditors due to the “the actions of third parties”.

The Russian authorities insist they have the funds to honour the country’s debt, calling the predicament a “farce” and accusing the West of pushing an “artificial” default.

Moody’s warned that more defaults “are likely”.

Moody’s released an “issuer comment” instead of a formal default declaration, as sanctions bar credit ratings agencies from covering Russia’s sovereign debt.

‘Limited’ impact

The sanctions have included freezing the Russian government’s stockpile of $300 billion in foreign currency reserves held abroad, making it more complicated for Moscow to settle its foreign debts.

After the United States closed the last payment loophole last month, Russia said it would pay debt in rubles that could be converted into foreign currency, using a Russian financial institution as a paying agent.

But Moody’s said it “would likely treat payments in rubles as a default for bonds that do not allow for such redenomination in the contractual terms”.

Moody’s to shut Moscow office

The country last defaulted on its foreign debt in 1918, when Bolshevik revolution leader Vladimir Ilich Lenin refused to recognise the massive debts of the deposed tsar’s regime.

Russia defaulted on domestic debt in 1998 when, due to a drop in commodity prices, it faced a financial squeeze that prevented it from propping up the ruble and paying off debts that accumulated during the first war in Chechnya.

The International Monetary Fund’s number two official, Gita Gopinath, said in March that a Russian default would have “limited” impact on the global financial system.