The impending Russian debt bankruptcy is likely to be one of the most difficult in history to resolve and could even lead the US to a permanent seizure of assets by the country’s central bank, according to a report by consulting firm Oxford Economics. Russia is facing its first foreign currency debt bankruptcy since the 1918 Bolshevik revolution. The US Treasury Department earlier this month prevented Russia from paying $ 650 million for two bonds using funds held by US banks. Russia, on the other hand, tried to pay in rubles, but credit rating agencies said it would go bankrupt. Russia has a 30-day grace period from April 4 to pay in dollars. But thoughts now turn to the next steps and how bondholders could get their money back. Tatiana Orlova, chief emerging market economist at Oxford Economics, said investors were facing a “very long and difficult” legal path. “Russia’s debt crisis will be one of the most difficult in history to resolve, as bankruptcy has its roots in politics rather than finance,” he wrote in a report sent to customers on Thursday. One of the main problems is that political and economic relations between Russia and the West have completely collapsed. This makes the usual default process, in which the bondholders and the government enter into negotiations and reach an agreement, seem unlikely to happen. Orlova said another problem for bondholders is that Ukraine could sue Russian assets in international courts to pay for the country’s reconstruction. In this case, investors will have to weigh whether they want to compete with the Ukrainian government for Russian assets. The economist said that the US may eventually end up seizing money from the foreign exchange reserves of the Russian central bank. Western governments have already frozen most of the $ 600 billion stock. Earlier this year, President Joe Biden ordered the release of half of Afghanistan’s central bank reserves, which had also been frozen, as possible compensation for 9/11 victims and for funding humanitarian aid to the country. “The US government could possibly find a stronger ethical reason for the split in the US foreign exchange portion of US-denominated foreign exchange between Ukraine and bondholders,” Orlova said. Russian Finance Minister Anton Siluanov said the government had fulfilled its obligations by paying in rubles. He said last week that Western governments were forcing Russia into bankruptcy and threatened to take legal action. It’s not just Russian sovereign debt holders who may have to go to court to try to get their money back. The Orlova report said there could be an “avalanche” of default on Russian corporate debt as the United States took a hard line and barred US banks from making payments. An international banking commission last week ruled that Russia’s state-owned Railways was bankrupt after sanctions prevented the company from making bond payments. There were about $ 98 billion in Russian foreign currency bonds pending as the war began in February, according to JPMorgan, with $ 21.3 billion owned by foreign investors. Read more: Oil shock: A Goldman Sachs analyst describes how investors can play a multi-year spell of wild instability on $ 30 fluctuations in crude oil prices – and shares his top trading ideas