Russia faces potential default scenario after using rubles to make payments on dollar bonds, industry group rules

• Russia's attempt to make payments on dollar bonds with rubles constitutes a potential default, a panel ruled.
• The Credit Derivatives Determinations Committee called the payment a "potential failure-to-pay event."

Russia's attempt to pay for two of its dollar bonds using rubles was deemed a potential default scenario by a derivatives industry watchdog on Wednesday, bringing the country to the brink of its first default in a century.

The Credit Derivatives Determinations Committee — a panel within the The International Swap and Derivatives Association — ruled that a "potential failure to pay" event had occurred, Reuters first reported. It is still possible for Russia to avoid a default if it manages to pay bondholders using dollars before a one-month grace period ends on May 4.

Russia has become increasingly cut off from global financial markets since invading Ukraine. Western nations have banded together to impose stringent sanctions on the country, including freezing roughly half of its $640 billion in foreign reserves.

However, Russia's finance ministry has argued that it has fulfilled all of its debt obligations, and has threatened to sue to regain access to its foreign currency reserves.

Last month, Russian Foreign Minister Sergey Lavrov called the stockpile freeze an act of "thievery" by Western nations.