Russia says had to pay rubles for foreign dollar debt amid default fears

A security guard stands in front of an exchange office with a screen displaying the exchange rates of the euro and U.S. dollar to Russian rubles in Moscow, Russia, March 31, 2022. (EPA Photo)

by Agencies

Apr 06, 2022 1:43 pm

Russia has had to pay rubles to holders of its dollar-denominated Eurobonds maturing in 2022 and 2042, its finance ministry said on Wednesday, in a new blow to efforts to avoid a sovereign default amid Western sanctions over the conflict in Ukraine.

The announcement came as a foreign bank refused to process Russia’s order to pay $649.2 million to holders of its debt.

The Russian Finance Ministry said the foreign bank, the name of which it has not disclosed, rejected Russia’s order to pay coupons on the two papers and also did not process the payment of the face value of the Eurobond maturing in 2022.

"A foreign correspondent bank refused to execute instructions for the payment" of debt on two bonds on April 4, it said.

"In order to fulfill the state debt obligations of the Russian Federation," the finance ministry "was forced to attract a Russian financial institution to make the necessary payments," it added.

The ministry did not specify if the ruble payment had been accepted.

Russia may consider allowing foreign holders of its 2022 and 2042 Eurobonds to convert ruble payments into foreign currencies once Russia’s access to its forex accounts is restored, the ministry said.

Russia’s ability to fulfill its debt obligations is in focus after sweeping Western sanctions in response to what Russia calls "a special military operation" in Ukraine have frozen nearly half of the country’s state reserves and limited Moscow’s access to global payment systems.

Many analysts say Russia is heading into default, but the Kremlin appeared to reject that assertion on Wednesday.

"Russia has all the necessary resources to service its debts," Kremlin spokesperson Dmitry Peskov told reporters.

Peskov said Russia could in theory find itself in default, but this would be an artificial situation.

There are no grounds for a real default, he noted, adding that Russia has all necessary funds to service its obligations but will continue to repay its external debt in rubles while its foreign exchange reserves remain blocked by Western sanctions.