From: 06/04/2022 15:22
For the first time, Russia paid interest and principal on dollar bonds in rubles. This brings the country closer to a technical default – although in fact it is solvent.
The stalemate over interest and principal payments owed by Russia is entering the next round. For the first time, Moscow made payments on two foreign currency bonds not in dollars, but in rubles. That money can be exchanged for dollars once the Russian Federation regains access to its Western-frozen foreign exchange accounts, the Russian Ministry of Finance said in a statement.
“Russia has all the resources it needs to pay off its debt,” said Kremlin spokesman Dmitry Peskov. “If this blockade continues and payments to pay the debt are blocked, they can be made in rubles.”
The Kremlin does not want to tamper with its own reserves
Until now, the US Treasury Department has allowed Russia to make payments to its holders of frozen dollar accounts at US banks on a case-by-case basis. He deviated from that on Monday and blocked payment of the $649.2 million owed. The measure was intended to force Russia to exploit its foreign exchange reserves under its direct control.
Apparently Moscow is not ready for this. According to experts, Russia now has 30 days to transfer this money in dollars. Otherwise, the process would become “Russia’s formal default on foreign debts,” as Russian expert Gerhard Mangott of the University of Innsbruck tweeted.
Would Russia be “bankrupt” if it went into default?
It is unclear whether such “formal default” in this unusual situation should really be described as “state bankruptcy” or “state bankruptcy”. In fact, according to experts, Russia is still solvent.
“Theoretically, a failure situation could be created, but it would be a purely artificial situation,” said Peskov, a Kremlin spokesman. “There is no reason for an actual payment default.”
Currently, international lenders hold a total of 15 bonds of the Russian Federation with a face value of around US$40 billion. The country was barred from issuing more bonds in Western financial markets as part of the sanctions until further notice. Even if it regained access to financial markets, Russia would not be able to borrow money until its creditors were fully satisfied and all legal disputes arising from the impending default were resolved.