The impending Russian debt default is likely to be one of the most difficult in history to resolve, Oxford Economics has said.
It could even result in the US seizing the Russian central bank's frozen assets, the consultancy's Tatiana Orlova said.
Russia still has a grace period in which to make dollar payments on its foreign bonds, but analysts say a default is likely.
The impending 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 the consultancy Oxford Economics.
Russia is facing its first default on its foreign-currency debt since the aftermath of the Bolshevik revolution in 1918.
The US Treasury earlier this month blocked Russia from paying $650 million due on two bonds using funds held at American banks. Russia has instead tried to pay in rubles, but credit ratings agencies have said this would constitute a default.
Video: How Russia is faring in its war on Ukraine
Russia has a 30-day grace period from April 4 in which to pay in dollars. But thoughts are now turning to the next steps, and how bondholders might recoup their money.
Tatiana Orlova, lead emerging markets economist at Oxford Economics, said investors face a "very long and difficult" legal road. "Russia's debt crisis will be among the most difficult in history to resolve, since the default has its roots in politics rather than finance," she wrote in a report that was sent to clients Thursday.
One of the key problems is that political and financial relations between Russia and the West have completely broken down. That makes the usual default process, whereby bondholders and the government enter negotiations and thrash out a deal, seem unlikely to happen.
Orlova said another problem for bondholders is that Ukraine may lay a claim to Russian assets in international courts to pay for the rebuilding of the country. In that case, investors would have to weigh up whether they want to compete with the Ukrainian government for Russian assets.
The economist said the US might eventually end up seizing the money from the Russian central bank's foreign currency reserves. Western governments have already frozen the bulk of the roughly $600 billion stockpile.
President Joe Biden earlier this year ordered that half of Afghanistan's central bank reserves, which were also frozen, be made available as possible 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-denominated portion of Russia's FX reserves between Ukraine and bondholders," Orlova said.
Russia's Finance Minister Anton Siluanov has said the government has fulfilled its obligations by paying in rubles. He said last week Western governments are forcing Russia into a default and threatened to take legal action.
It's not just holders of Russian sovereign debt who may have to take to the courts to try to get their money.
Orlova's report said there is likely to be an "avalanche" of Russian corporate debt defaults, given that the US is taking a hard line and banning American banks from processing payments.
An international committee of banks last week deemed state-owned Russian Railways to be in default, after sanctions stopped the company from making bond payments.
There were roughly $98 billion of Russian corporate foreign-currency bonds outstanding as the war began in February, according to JPMorgan, with $21.3 billion owned by foreign investors.
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