Russia has given up rubles and paid its debt in dollars

Russia appears to have given up its last-minute intention to pay only in rubles while its bank reserves are frozen, and has repaid some of the overdue interest payments in dollars, Reuters reported.

Russia’s finance ministry said on Friday it had managed to pay $ 564.8 million in interest on a 2022 Eurobond and $ 84.4 million on another 2042 dollar bond, the currency specified in the bonds.

A US administration official told Reuters that Moscow had made the payment without using reserves frozen in the United States, adding that the exact origin of the funds was unclear.

The money went to the London branch of Citibank, one of the “paying agents” whose job it is to pay it to bondholders, but the bank declined to comment.

“Payments are made in the currency of the issue of the respective Eurobonds – in US dollars,” the Russian Finance Ministry said. “In this way, the obligations to service sovereign Eurobonds have been met.”

Two bondholders said they had not yet received the funds, but the process could take days.

“I see no reason why they (the payment agent) should not be able to make this payment,” said Kaan Nazli, portfolio manager of the Emerging Markets Debt team at Neuberger Berman, which holds Russian government bonds.

Interest payments were due earlier this month, but the 30-day “grace period” that government bonds often have in their terms meant Moscow’s deadline was May 4th.

According to brokers, the announcement of the payment has raised the price of Russian government bonds by up to 15 cents, almost doubling their value in dollars in some cases. Those owned by large as yet unauthorized companies such as Gazprom, Lukoil, and the telecommunications company VimpelCom have also risen 2-5 cents.

Russia has not gone bankrupt since the 1998 financial crash and has not seen major international or “external” market failures since the 1917 Bolshevik revolution. However, the risk of a new default is growing as Western countries impose sanctions on Russia in return. of its invasion of Ukraine.

Russia’s prospect of bankruptcy was almost unthinkable before it invaded Ukraine. The billions of dollars she earns from the sale of oil and gas around the world meant that she has one of the lowest levels of government debt in the world and a huge reserve of foreign exchange reserves. Western sanctions have frozen many of these reserves, which means that banks need special permits to make payments related to Russia, Reuters recalls. The payment license issued by Washington expires on May 25 and is unlikely to be renewed.

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