Russia might be on the verge of default on its foreign currency debtsThis is likely to be the start of an extended wrangling with international agencies for the first times in decades.

International sanctions on the Central Bank of RussiaIn response to unprovoked invasion of UkraineA substantial amount of the country’s foreign currency reserves have been blocked, which would normally be used to service its sovereign debt obligations.

Measures taken by Moscow to mitigate the impact — such as capital controls — have led major ratings agencies to downgrade Russia’s government debt, concluding that a debt default is now highly likely.

Russia would be in its first sovereign default since 1998 when it defaulted domestically. It also marks the first sovereign default for foreign currency debts since 1918’s Bolshevik Revolution.

CNBC’s quick guide on what’s happening:

Russian government will pay $117 millions in interest two sovereign eurobonds on WednesdayMoscow has yet to pay the fourth of its four creditors by March 31st, though economists are unsure how Moscow will repay its debt obligations.

Anton Siluanov (Russian Finance Minister) indicated that Russia will utilize its foreign reserves Monday Chinese yuanYou can make some of the payments by using eurosAnd dollarsSanctions have made it impossible to access the site.

The government also warned that creditors from hostile countries would be liable for any payments. rublesThe currency has seen a sharp decline in value since the invasion.

William Jackson, chief emerging markets economist at Capital Economics, explained in a note Monday that although some Russian FX bonds — those issued from 2018 — permit payments in rubles if they are not able to be made in other currencies, this does not apply to Wednesday’s payments.

Jackson stated that trying to pay in rubles is equivalent to default. However, Jackson did not mention the 30-day grace period.

The West has an actual interest in Russia reducing its foreign currency assets so that it can pay off creditors. Further, this further reduces the value of Russian currency assets. according to Timothy Ash, senior emerging markets sovereign strategist at BlueBay Asset Management.

Ash wrote Monday that “At the moment the message seems like it is that the Ministry of Finance wants and can pay but is being blocked by sanctions on CBR,” Ash said in an email.

“It even issued a directive that stated it would make payments in FX for foreign correspondent bank debt service. But, if those banks cannot transact through the CBR, sanctions will apply and the money owed will then be paid in rubles, held at National Security Depository (NSD), with payment made via the so-called S’ accounts at a later date.”

Which are the possible consequences?

Ash stated that this would be a likely default. However, Russia’s finance ministry will argue that Russia tried to pay, but could not complete the transaction because of sanctions.

Ash said that while the MOF may not be able pay its foreign creditors in the first respect, this saves FX reserves and b) damages investors in enemy nations. They then hope they will lobby their governments to get sanctions relief. However, Ash noted, “The downside to non-payment and possible default would have severe and long-term consequences for Russia.”

Russian rating agencies would reduce Russia’s credit ratings to default status if it fails to make payments. The delay would result from difficulties in restructuring its debt. Ash suggested that this would increase Russian borrowing costs and reduce financing options from countries like China.

Even if the conflict ends quickly and there is peace, ratings agencies and markets will recall this crisis for some time. Ratings will slow to recover and Russian borrowing costs will slow to moderate. He added that this will hinder Russian economic growth for many years.”

Ash indicated that some of this money would have been paid by Wednesday. It is possible, however, for some investors to be denied access.

Russia and rating agencies will have to also debate whether or not this is a default. He suggested that the dispute could end up before the courts.

It could lead to even more defaults.

Capital Economics’ Jackson stated that, while defaults are largely priced out for foreign investors, Russia’s strong public financial system means Russia isn’t heavily dependent on foreign finance. However, Russian corporate credit could be under threat.

He stated that “Perhaps it is a greater risk than defaults by Russian corporates, which have external debts more than four-times larger than sovereigns.”

While Russian corporations have so far continued to service their debts following the tightening of sanctions, with trade being disrupted and sanctions possibly increasing, the possibility for corporate defaults is growing.

BlackRock and PimcoThese fund managers were already identified as having exposure to Russian debt. However, most of the positions have been reduced and reflect in the fund price.

The fears that Russia’s default could cause a worldwide contagion have been dismissed by economists. Kristalina Georgieva, IMF’s Managing Director, stated in an interview that Russia’s $120 billion exposure by global banks is not “systematically relevant”.

Jackson said that creditors overseas had reduced their holdings and pointed out that Russian sovereign debt is only around $20 billion.