Russia looks to swerve default
LONDON/WASHINGTON: Russia made what appeared to be a late U-turn to avoid a default on Friday, as it made a number of overdue interest payments in dollars on its overseas bonds, despite previously vowing to pay only in roubles as long as its reserves remained frozen.
Russia’s $40 billion of international bonds have become the focus of a game of financial chicken amid sweeping Western sanctions - and speculation about a default is likely to revive in less than four weeks, when a US license allowing Moscow to make payments is due to expire.
Russia’s finance ministry said it had managed to pay $564.8 million in interest on a 2022 Eurobond and $84.4 million on another 2042 bond in dollars - the currency specified on the bonds.
A senior US official confirmed Moscow had made the payment without using reserves frozen in the United States, adding that the exact origin of the funds was unclear.
Deputy US Treasury Secretary Wally Adeyemo told Reuters that the payments siphoned funds away from Russia’s Ukraine war effort and were a “sign of success” for US sanctions policy.
He declined to comment on the future of a Treasury general license due to expire on May 25 that allows banks to process Russian debt payments.
“Our overarching goal is to try to starve Russia of the resources that they’re using to both prop up their economy and finance their war effort, and to stop their invasion of Ukraine. So we’re going to keep making policy decisions with that in mind,” Adeyemo said.russia said it had channelled the required funds to the London branch of Citibank, one of the “paying agents” whose job it is to disburse them to the bondholders.
“The payments were made in the currency of issue of the corresponding Eurobonds - in US dollars,” the Russian Finance Ministry said. “Thus, the obligations to service sovereign Eurobonds are fulfilled.”
Two holders of the bonds said they had not yet received the funds, but the process can take days.