Russia avoided a debt default by making a last-minute payment using its precious dollar reserves located outside the country, US Treasury officials said.
The amount of the payment was not disclosed, but earlier this month the Russian Finance Ministry said it had attempted to make a payment of $649 million (A$919 million) due on April 6 for two bonds to an unnamed US bank, previously reported as JPMorgan Chase.
At this time, the increased sanctions imposed for Russia’s invasion of Ukraine prevented the payment from being accepted, so Moscow attempted to effect payment of the debt in rubles.
The Kremlin, which has repeatedly said it is financially able and willing to continue paying its debts, argued that extraordinary events gave it the legal basis to pay in rubles, instead of dollars or euros.
Investors and rating agencies, however, disagreed and did not expect Russia to be able to convert rubles to dollars before a 30-day grace period expired. next week, suggesting that Moscow was headed for a historic default on its debt.
Russia has not defaulted on its foreign debts since the Bolshevik Revolution of 1917.
Treasury officials, who declined to be named because they were not authorized to speak officially, said Russia tapped into its foreign currency reserves outside the country to make the Friday payment.
Since the United States sanctioned the Central Bank of Russia at the start of the conflict, Russia had only the option of using either new revenues from activities such as oil and gas sales, or reserves foreign currencies existing outside the country.
The United States has attempted to force Russia to use its foreign exchange reserves – or any revenue from oil and gas sales – in order to deplete the country’s financial resources.
The Russian Finance Ministry said it made the payments at a London branch of Citigroup. A Citi spokeswoman declined to comment.
Australian Associated Press