Russia says it made a key bond payment to avoid debt default of $ 117 million

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Russia says it made a key bond payment to avoid debt default of $ 117 million

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Russia On Thursday it said it had fulfilled a critical interest rate payment on two dollar-denominated bonds, potentially avoiding a historic debt default.

Moscow was expected to pay $ 117 million in interest on Eurobonds on Wednesday; failure to pay such payments would mark Russia’s first foreign debt default since the Bolshevik Revolution of 1917, according to JPMorgan Chase.

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But Russian finance minister Anton Siluanov told Russian state media that Moscow has fulfilled its obligations to creditors. The ministry said it would comment later in the day whether it made the payment to Citibank in London, its Eurobond paying agent.

“We have the money, we made the payment, now the ball is on the American court,” said Siluanov.

Citibank did not immediately respond to a request for comment from FOX Business.

MOSCOW, RUSSIA – DECEMBER 12: (RUSSIA OUT) Russian President Vladimir Putin greets First Deputy Prime Minister Anton Siluanov during his meeting with members of the Victory Organizing Committee in preparation for the 75th anniversary of WWII in Mosc (Mikhail Svetlov / Getty Images / Getty Images)

that of Moscow invasion of Ukraine nearly a month ago – the largest attack on a European state in decades – sparked a series of economic sanctions from Western nations, including cutting a key part of the Russian central bank by preventing it from selling dollars, euros and other foreign currencies into its reserve stock of approximately $ 630 billion.

You financial fallout prompted credit rating agencies to downgrade their long-term debt rating for the Russian government to “junk” status, with Fitch warning that international sanctions have brought a “huge shock to Russian credit fundamentals.” He noted that additional penalties remain a distinct possibility.

Russia sought a way to mitigate the blow: The central bank more than doubled its key interest rate to 20% in early March after some banks were removed from the Swift financial system and the West froze a significant part of its foreign exchange reserves.

Protesters hold a sign with the message “Abramovich cannot be Portuguese” during a protest against the Russian invasion and in solidarity with the Ukrainian people, in front of the Russian embassy in Lisbon on Sunday 2 February. 27, 2022. (Photo AP / Ana Brigida / AP Press Room)

Earlier this week, Siluanov said Moscow will repay creditors of “hostile countries” in rubles and possibly Chinese yuan until sanctions are lifted, with sanctions preventing the nation from accessing its dollar and euro reserve. The ruble has depreciated sharply since Russia attacked Ukraine. As of Wednesday morning, 107 rubles were worth $ 1.

He said Russia must pay coupons on its Eurobonds and has already asked Western banks to proceed with the transactions.

“Is this a default value?” Siluanov asked during an interview on Monday on the Russian state news bulletin. “From Russia’s point of view, we are fulfilling our obligations.”

A powerful coalition of democracies announced it would cut some Russian banks out of the Swift global payment system. (Anton Vaganov / Reuters / Reuters)

Others, however, argue that the payment of dollar-denominated bonds in rubles constitutes a default. It is unclear whether Russia will default on its debt if it pays in rubles. Siluanov accused Western nations of orchestrating sanctions with the intention of creating a default that “has no real economic basis”.

It is unclear whether Moscow made the payment this week in rubles, yuan or frozen funds.

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Kristalina Georgieva, head of the Washington-based International Monetary Fund, said on Sunday that a Russian default is no longer “unlikely”.

“Russia has the money to pay its debt, but it cannot access it,” he said in an interview with CBS News.

If Russia fails to meet its obligations, there is a 30-day grace period that provides coverage until April 15. But if Moscow indicates it does not intend to pay its debt, credit rating agencies could default Russia before the final Deadline.

Russia’s central bank is set to meet again on Friday in an effort to avoid a full-blown financial crisis.

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