After Western sanctions were implemented in the aftermath of Russia’s invasion of Ukraine, the country may be on the verge of defaulting on its obligations.

Today, it will pay $117 million in interest to holders on two dollar-denominated bonds.

However, Russia’s access to $630 billion (£470 billion) in foreign currency reserves has been halted.

A debt default is “imminent,” according to credit rating agencies.

While the International Monetary Fund (IMF) is concerned about the consequences of a Russian debt default, it does not believe it would result in a worldwide financial catastrophe.

The Russian government, as well as companies like Gazprom, Lukoil, and Sberbank, owe around $150 billion to foreign investors.

The majority of this is in dollars or euros, and due to sanctions, Russian institutions are now unable to access dollar or euro assets held abroad.

If Russia defaults, it will be the first time since 1998 that the government has defaulted on its debt.

It would also be the country’s first default on a foreign-currency loan since 1917, when the new Bolshevik government refused to recognize the previous tsar’s debts.

The government may choose to pay using dollars kept in Russia; while it cannot access dollars held abroad, it does have some dollars held in Russia. If that were to happen, default concerns would be alleviated for the time being.

Another option is that Russia does not pay today – despite the fact that the $117 million is due today, the payment has a 30-day grace period to be settled by April 15th.

A third possibility is for Russia to pay in roubles. Its foreign ministry has stated that if it is unable to pay overseas investors in dollars or euros, it will pay them in roubles.

However, none of the two dollar-denominated debts that must be paid today allow for the use of any other currency, therefore a default is imminent.

Some of Russia’s other debt arrangements allow for the use of various currencies, so paying in roubles could be an option.

This would be determined by whether the rouble payment was assessed to have the same value as the expected dollar or euro payment.

In recent days, Russian investors have seen the value of their assets plummet.

The issue for many will have been the speed with which Russia’s financial collapse occurred, leaving them little time to respond by selling off their holdings.

According to credit ratings firm Moody’s, Russia’s rating is currently at its second-lowest on a 21-point scale that determines how safe a nation is to invest in, and it might slide even worse.

This rating, according to Moody’s, indicates that the company expects Russia to default and that investors in Russia might lose between 35 and 65 percent of their investment.

The last time Russia defaulted, in 1998, the financial markets were thrown for a loop. According to Capital Economics senior economist William Jackson, a default today would be highly symbolic but “unlikely to have serious implications.”

As a result of the war, the IMF has revised its prediction for world economic growth to 4.4 percent in 2022. IMF chief Kristalina Georgieva, on the other hand, has dismissed the possibility of a broader global financial system shock as a result of a Russian default.

She did, however, warn that the sanctions on Russia would cause a “severe recession” in the country and that the war would raise world food and oil costs.

The unknown issue at this time is whether Russian companies would default on their debts, and what impact this will have on foreign investors that have substantially invested in Russia.

Any debt default is expected to deepen Russia’s current financial and economic challenges.

Prior to its invasion of Ukraine, Russia was regarded as one of the world’s most creditworthy countries, with low debt levels. However, things have drastically altered since then.

To defend the economy and the rouble, Moscow has already enacted severe credit controls to curb the outflow of money. Despite this, sanctions are expected to cause Russia’s GDP to contract by 7% this year.

Before the invasion of Ukraine, inflation was already at 9.15 percent in February. Despite Russia’s central bank hiking interest rates from 9.5 percent to 20 percent, it is now expected to rise considerably this year.