There is now an 80% chance that Russia will default on its bonds, according to a BlueBay Asset Management strategist. According to Timothy Ash, a default is more likely after the US Treasury blocked the Russian government from using American banks.
The default might hurt US bondholders, but it is their own fault for investing in the country.
A person familiar with the matter told Insider that the US Treasury blocked the bank from processing more than $600 million worth of maturity and coupon payments on dollar bonds.
The US agency told the Financial Times that the US Treasury will not allow dollar debt payments from Russian government accounts at US financial institutions.
The Treasury did not respond to a request for comment.
Ash said that Russia has enough dollars to pay. It still has access to a chunk of its foreign currency reserves, and it is making money from oil and gas exports.
The government is likely to have a hard time finding banks who will process its payments, he said.
International banks wouldn't want that business. He told Insider that you could end up with someone like Gazprombank. Due to its importance in natural gas markets, Gazprombank has escaped sanctions.
How do you get your money if you are a US fund? The BlueBay strategist said that if the payment is processed by Gazprombank, they will pay the US fund's US bank account.
Ash said a default would be for Russia. He said it was hard to see a typical negotiation process taking place between investors and the government.
The strategist said foreign bondholders would be hurt by the move.
He said that if you are long Russia, it is your own fault, given the track record over the last decade and the warnings late last year.
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