Russia’s historic default has been avoided since the sanctions on foreign currency reserves have been imposed, but analysts think it may be delaying the inevitable.

Moscow paid last week to holders two dollar-denominated Russian sovereign bondsThe, with maturities in 2022, 2042 and a combined value of $650million, will be matured before May 4, after a grace period of 30 days.

When the U.S. Treasury Department tried to block a payment from dollars held in U.S. banks, the Russian Finance Ministry attempted to first make payments in rubles. The majority of the payments were made in rubles. Central Bank of RussiaInternational sanctions placed on Ukraine after its invasion have frozen the vast amounts of foreign currency held by these banks.

According to major rating agencies, this would have been Russia’s first default on foreign debt since 1917. If Russia hadn’t met its foreign currency obligations before the grace period ended, it would have become the nation’s first. Russia discovered a source of money that was not restricted by sanctions and allowed payments to be made on both bonds.

Although the payment was successfully delivered, prices of Russian government bonds have remained well below those seen in February 24, when Russia invaded Ukraine.

MSCI Research stated last week that, despite recent rallies, the “probabilities for default implied by credit-default swap market were still extraordinarily high across the one and five year horizons.”

“The rally in Russian sovereign bonds might have encouraged some investors to believe that Russia won’t default,” stated Andy Sparks (Managing Director MSCI) and Gabor Almasi (Vice President).

“As May 3rd, the default probability for one-year was 67%. This is down from 95% as of April 26. In the same time, default probabilities over five years decreased from 99% down to 88%.

All eyes on May 25,

Russia is exempted from U.S. sanction exemptions that allow bond payments for Russian sovereign debt, from sources approved by Treasury.

MSCI said that the exemption runs out on May 25, but it will be void if extended. It could also trigger default events when multiple Russian bond payments are due by May 27.

MSCI stated that the Russian government can extend the exemption and make additional payments for bondholders, as long it shows willingness to pay. This exemption has yet to be extended by the Treasury.

Russia’s Finance Ministry served the principal and $650m coupon payments over the last week. This showed it did not wish to default, and understood that long-term consequences could be devastating, according to Timothy Ash of BlueBay Asset Management, a senior EM sovereign strategist.

Ash said that it is now up to the U.S. Office of Foreign Assets Control whether they will continue the general license for foreign credit service past May 25.

The U.S. has long believed that Russia should be allowed to access the limited FX liquidity (foreign currency) that is not already frozen in the West. Ash stated in an email that the actual benefits of this liquidity being drawn down marginally, with only a few billion of external debt service here or there, pale into insignificance in comparison to the PR and economic hit Russia would suffer from a sovereign default.

“The Russians themselves revealed their own cost-benefit calculations by paying earlier this month – so the interests of OFAC surely now are the opposite.”

Ash asked why OFAC would grant the license to Russia, pointing out that Russia could still avoid default by finding a way around OFAC’s refusal to issue.