Russia will be considered in default if it uses rubles to make payments on its US dollar bonds, Fitch Ratings says

• Russia using the ruble to pay interest on its US dollar bonds would constitute a sovereign default, Fitch says.  
• Russia is facing a Wednesday deadline to make $117 million in interest payments on two US dollar bond coupons. 
• Moscow would have 30 days to remedy payments made in rubles to avoid defaulting. 

Russia using rubles to make payments on US dollar bond coupons would constitute a sovereign default following a grace period, Fitch Ratings said Wednesday. 

Russia is facing a Wednesday deadline to pay $117 million worth of interest payments on two US dollar bonds. The country has been hit with sanctions by the US and its Western allies for invading Ukraine, essentially cutting Moscow off from about of its $640 billion worth of foreign currency reserves, a move that makes it difficult for the country to service its debts. 

A "payment in local currency of Russia's US dollar Eurobond coupons due on 16 March would, if it were to occur, constitute a sovereign default, on expiry of the 30-day grace period," said Fitch in a statement. 

Russia addressing its debt obligations in rubles would prompt Fitch to downgrade the ratings on the bonds to a "D" if the coupon payments aren't made in US dollars by the end of the grace period that runs through mid-April. Fitch would also cut Russia's long-term foreign-currency rating to a 'Restricted Default' level. 

Fitch said a "forced redenomination" of payment obligations would line up with its March 9 downgrade of Russia's credit rating to "C" earlier this month as it anticipated an "imminent" default. That downgrade was Fitch's second against Russia in seven days, with the first cut sending the credit rating to junk status. 

The value of Russia's currency sank after Moscow launched its war against Ukraine in late February, leaving the ruble worth less than a penny against the greenback.