Russia pays off last-minute bonds to avoid default

US Treasury officials said Russia avoided defaulting on its debt on Friday by making a last-minute payment using its precious dollar reserves held outside the country.

The amount of the payment was not disclosed, but earlier this month Russia’s Finance Ministry said it tried to repay $649 million due on April 6 for bonds of an unnamed US bank – previously reported as JPMorgan Chase.

At that time, the severe sanctions imposed on the Russian invasion of Ukraine prevented the acceptance of payment, so Moscow tried to pay off the debt in rubles. The Kremlin, which has repeatedly said that it is able and ready to continue paying its debts, said unusual events gave them the legal basis for payment in rubles, rather than dollars or euros.

Investors and rating agencies, however, He disagreed and did not expect Russia to be able to convert rubles into dollars before the 30-day grace period expires next week, leading to speculation that Moscow is heading toward a historic default on its debt.

Russia has not defaulted on its foreign debt since the Bolshevik Revolution of 1917, when the collapse of the Russian Empire led to the creation of the Soviet Union. The Governing Council on credit default quagmire – insurance contracts designed to protect against default – had already ruled that Russia was in default.

Treasury officials, who declined to be named because they were not authorized to speak publicly, said Russia had tapped into its foreign exchange reserves currently outside the country to make Friday’s payments. Since the United States imposed sanctions on the Russian Central Bank early in the conflict, Russia has only had the ability to use new revenue coming in from activities such as oil and gas sales, or foreign currency reserves held outside the country.

The United States is trying to force Russia to use its foreign exchange reserves – or any revenue from oil and gas sales – in order to drain the country’s finances.

The Russian Finance Ministry said it made the payments at a branch of Citigroup in London. A Citi spokeswoman declined to comment on whether the bank handled the deal.

___

Hussein reported from Washington.