The upcoming Russian debt default is likely to be one of the most difficult in history to resolve, and could even lead the US to permanently seize assets from the country's central bank, according to a report from Oxford Economics.
Russia is facing a default on its foreign-currency debt for the first time since 1918.
The US Treasury blocked Russia from making a $650 million bond payment because of funds held by American banks. Russia tried to pay in rubles, but credit ratings agencies said this would be a default.
Russia has a 30-day grace period in which to pay in dollars. The next steps, and how bondholders might recover their money, are now being contemplated.
Russia's debt crisis will be among the most difficult to resolve, since the default has its roots in politics, according to the lead emerging markets economist at Oxford Economics.
Political and financial relations between Russia and the West have completely broken down. The default process, where bondholders and the government enter negotiations and hammer out a deal, seems unlikely to happen.
The problem for bondholders is that Ukraine may try to get Russian assets in international courts to pay for the rebuilding of the country. The investors would have to decide if they want to compete with the Ukrainian government for Russian assets.
The economist said the US could eventually take the money from the Russian central bank. Most of the $600 billion stockpile has been frozen by the Western governments.
President Joe Biden ordered that half of Afghanistan's central bank reserves be made available as compensation for victims of 9/11 and to fund humanitarian support in the country.
The US administration could possibly find a stronger moral cause for splitting the US portion of Russia's foreign exchange reserves.
The Finance Minister said that the government had fulfilled its obligations by paying in rubles. He said last week that the Western governments were threatening to take legal action against Russia.
The holders of Russian debt may have to go to the courts to get their money.
The US is taking a hard line and banning American banks from processing payments, which is likely to lead to Russian corporate debt defaults.
Russian Railways was deemed to be in default by an international committee of banks after sanctions stopped the company from making bond payments.
As the war began in February, there were roughly $98 billion of Russian corporate foreign-currency bonds outstanding, with $21.3 billion owned by foreign investors.
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