Financial ratings agency Standard & Poor’s has lowered Russia’s foreign currency rating to “selective default” to reflect the increased risks that Moscow will neither be able or willing to honour its commitments to foreign debt-holders.

Facing waves of sanctions over its invasion of Ukraine, Russia could face its first sovereign external default in more than a century after it made arrangements to make an international bond repayment in roubles this week, even though the payment was due in US dollars.

S&P said it understood Russia made coupon and principal payments on dollar-denominated Eurobonds in roubles on Monday.

“We currently don’t expect that investors will be able to convert those rouble payments into dollars equivalent to the originally due amounts, or that the government will convert those payments within a 30-day grace period,” the ratings agency said on Saturday.

Sanctions were likely to be further increased, the agency said, “hampering Russia’s willingness and technical abilities to honour the terms and conditions of its obligations to foreign debt-holders”.

Russia’s finance minister has said the country will do everything possible to pay its creditors, but investors in its international bonds face increasing uncertainty should the country default.

S&P assigns a selective default rating when it believes the debtor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner.

-AAP