Russia has threatened to pay international bondholders in roubles rather than dollars just days before a key interest payment on its external debt comes due.
Anton Siluanov, Russia’s finance minister, said on Sunday that it was
“absolutely fair” the country would make all of its sovereign debt payments in roubles until western sanctions that he claimed have frozen $300bn of the country’s reserves were lifted.
Moscow is scheduled to make a combined $117mn in interest payments this
Wednesday on two dollar-denominated bonds, according to JPMorgan. Neither bond’s contracts gives Russia the option of paying in roubles, according to the Wall Street bank.
The latest warning to foreign bondholders ratchets up the chances the country will default on its debt for the first time since the Russian financial crisis in 1998, as its financial system comes under heavy strain from the measures western governments have taken following the invasion.
“We need to pay for critical imports. Food, medicine, a whole array of other vital goods,” Siluanov told a state television interviewer. “But the debts we need to pay to the countries that have been unfriendly to the Russian Federation and have limited our use of foreign currency reserves — we will pay off our debt to these countries in the rouble equivalent,” he said.
Siluanov said that almost half of Russia’s $643bn foreign reserves had been hit by the sanctions, but did not disclose the denominations and jurisdictions where Russia holds other currencies.
Investors have been bracing for a default, with both bonds trading at around 20 cents on the dollar. Moscow will have a 30-day grace period to make the coupon payments.
International investors hold around $170bn in Russian assets, according to
Financial Times calculations, with foreign currency bonds accounting for
$20bn. More than two dozen asset management companies have had to freeze