Russia’s finance ministry said that it had paid bondholders to meet a key debt deadline yesterday amid confusion over whether Moscow’s sanctions-hit government was on the edge of a default.
Markets were watching closely whether the Kremlin would make a $117 million debt interest repayment after western sanctions froze assets of its central bank and placed restrictions on the use of dollars.
Yesterday morning Anton Siluanov, the finance minister, said that the payment had been made but warned that its success would depend on authorities in the United States allowing the transaction through. One investor said no funds had been transferred by yesterday afternoon, according to Reuters.
“The possibility or impossibility of fulfilling our obligations in foreign currency does not depend on us,” Siluanov told Russian media. “We have the money, we paid the payment, now the ball is on the side of the US authorities.”
Russia’s failure to pay creditors would mark the country’s first default on foreign bonds since the Bolshevik Revolution and the second since 1998, when it defaulted on local currency debt.
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This week Siluanov said Moscow could be forced to repay foreign debt in roubles, raising fears that this would still constitute a default in the eyes of creditors if they cannot convert the money into dollars owing to sanctions.
Fitch, the ratings agency, said that a forced redenomination of bonds would constitute a “default or default-like event” and would lead to a further downgrade on Russia’s junk status bonds. A default can be declared only after a 30-day grace period when Moscow can negotiate terms with creditors.
