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Mural with Putin's likeness: Moscow wants to pay in rubles
Photo: Darko Vojinovic / dpa / AP
For the first time, Russia made payments for two foreign currency bonds not in dollars but in rubles.
Because of the Western blockade of its foreign exchange reserves as a result of the war against Ukraine, Moscow intends to continue to do so in the future.
"Russia has all the necessary resources to service its debt," said Kremlin spokesman Dmitry Peskov.
"If this blockade continues and payments to service the debt are blocked, they could be made in rubles."
Earlier, the Treasury decided to make the payments of $649.2 million that are actually due to the creditors of the government bonds that run until 2022 and 2042 in the national currency rubles.
According to experts, Russia now has 30 days to transfer this money in dollars.
Otherwise, the process would become "a formal default by Russia on foreign debts," as the Russia expert Gerhard Mangott from the University of Innsbruck tweeted.
"Theoretically, an outage situation could be created, but that would be a purely artificial situation," said Kremlin spokesman Peskov.
»There are no reasons for a real payment default.«
The US wants to force Moscow to make a decision
The US had previously increased pressure on Russia over the invasion of Ukraine.
The Treasury Department in Washington prevented the Russian government from making the payments due from the foreign exchange reserves held at US banks, which was previously possible.
This is intended to force the Kremlin to make a choice: use dollars it has access to domestically to either pay its creditors or use them for other purposes, such as financing the war and risking a state bankruptcy.
"Russia must decide whether to use up the remaining valuable dollar reserves or generate new revenue -- or default," a US Treasury Department spokesman said.
If the obligations are not met, Russia faces the first default since the Russian Revolution in 1917, when the Bolsheviks refused to recognize debts from the tsarist era.
Rating agencies warn of a default by Russia and justify this with increased doubts about Moscow's willingness to pay.
Although Russia has a well-stocked state treasury, the sanctions mean that it has very limited access to currency reserves.
Still no access to bond markets in the future?
The major US bank JPMorgan Chase has so far processed the Russian payments as a correspondent bank.
It has now been stopped by the Treasury Department, an insider told Reuters news agency.
In total, Russia has 15 outstanding international bonds with a face value of around $40 billion.
Due to the sanctions, Russia currently has no access to the international bond markets to borrow fresh money.
A default would probably prevent the country from accessing these markets for many years - namely until the creditors are fully satisfied and all legal disputes resulting from the default are settled.
mmq/Reuters