Russia Makes Last-Minute Dollar Debt Payments to Avoid Default – Amid a worsening economic situation in Russia and a slew of Western economic sanctions, a series of last-minute U.S. dollar payments were made to international creditors on Friday, avoiding a default. It comes after Russia previously promised to only pay its debt in rubles.
The Russian Ministry of Finance said that it had paid a total of $564.8 million on a 2022 Eurobond, as well as $84.4 million on a 2042 bond. Both payments were made in dollars.
The Russian finance ministry also said that it had moved the necessary funds to pay a London branch of Citibank.
It is unclear, however, whether the payments will ultimately make it to the West is up in the air. Russia is locked out of the SWIFT banking system and sanctions implemented by the United States and European Union have made it almost impossible for Russia to transfer funds overseas or make dealings in foreign currencies
Russia Previously Made Payments in Rubles
On April 4, Russia made a payment on the same two sovereign bonds in rubles rather than in U.S. dollars, which was required under the terms of the contract. Moody’s, an investment service that also determined credit ratings, said that the decision to make payments in the local currency could have constituted a default if not remedied by May 4, which would be the end of the one-month grace period outlined in the contract.
“The bond contracts have no provision for repayment in any other currency other than dollars. Although Eurobonds issued after 2018 allow under certain conditions for repayments to be made in rubles, those issued before 2018 (including the 2022 and 2042 bonds) either do not contain this alternative currency clause or allow for repayments to be made only in other hard currencies (dollar, euro, pound sterling or Swiss franc),” Moody’s analysts said at the time.
The recent U.S. dollar payment rectifies the last payment and avoids Russia slipping into default.
Russia has not defaulted on its foreign debt since 1917, during the Bolshevik revolution. The last time the country defaulted on any debt was in 1998. However, since the outbreak of the invasion of Ukraine and the Western sanctions that followed, the country has come close to defaulting on several occasions.
Russian Finance minister Anton Siluanov said in March that if Russia is forced into default by Western sanctions, the country plans to take legal action.
Jack Buckby is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and reports on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society.