Russia is now exposed to a historic debt default: Here's what happens next

Russian President Vladimir Putin attends the Collective Security Treaty Organization (CSTO) summit at the Kremlin in Moscow, Russia May 16, 2022.

The U.S. has announced that it will not extend an exemption permitting Moscow to pay foreign debt to American investors in U.S. dollars, potentially forcing Russia into default.

Up until Wednesday, the U.S. Treasury Department had granted a key exemption to sanctions on Russia's central bank that allowed it to process payments to bondholders in dollars through U.S. and international banks, on a case-by-case basis.

This had enabled Russia to meet its previous debt payment deadlines, though forced it to tap into its accumulated war chest of foreign currency reserves in order to make payments.

However, the Treasury Department's Office of Foreign Assets Control has allowed the exemption to expire as of 12:01 a.m. ET on Wednesday...