Russia is rapidly approaching default -

Russia is rapidly approaching default –

As of Wednesday, April 6, this year, Russia was approaching a possible default on its international debt, as it set aside rubles to pay international bondholders who must receive the dollar amounts and said it would continue to it does so as long as its foreign exchange reserves are blocked by sanctions.

Thus, on Monday, the United States prevented Russia from paying its sovereign debt holders more than $ 600 million in frozen reserves held by US banks, saying that Moscow must choose between emptying its dollar reserves domestically and entering into incapacity. payment, Reuters reports.

In this regard, Russia has not been in default of its foreign debt since it gave up its payments due after the Bolshevik Revolution of 1917, but its obligations have again become a hot spot in the diplomatic crisis and in the exchange of sanctions between Moscow and the western capitals.

Currently, “This is accelerating the timing around the time when Russia no longer has room for willingness and ability to pay,” said a fund manager who holds one of the bonds to be paid on Monday.

The Kremlin has said it will continue to pay its debts

In his opinion, “Russia has all the necessary resources to pay its debts… If this blockade continues and the payments for debt service are blocked, this (future payment) could be made in rubles,” the spokesman said. of the Kremlin, Dmitry Peskov.

In fact, Moscow has managed to make a series of foreign currency coupon payments for some of its 15 international bonds with a face value of about $ 40 billion, which were in circulation before the United States stopped such transactions. .

While sanctions have frozen about half of Russia’s $ 640 billion in gold and foreign exchange reserves, the country continues to receive billions of dollars in crude oil and gas exports.

Russia had to pay in rubles

Russia’s Finance Ministry said on Wednesday that it had to pay rubles to holders of dollar-denominated Eurobonds maturing in 2022 and 2042, as a foreign bank refused to process a $ 649 million payment order to its debt holders. sovereign.

In addition, the Ministry of Finance said that the foreign bank, whose name was not mentioned, rejected Russia’s order to pay the coupons for the two bonds and also did not process the payment of a Eurobond maturing in 2022.

Russia’s ability to meet its debt obligations is in the spotlight after drastic sanctions in response to what Moscow calls a “special military operation” in Ukraine froze nearly half of its reserves and restricted access to global payment systems. .

Also on Wednesday, the United States targeted Russian banks and the elite with a new round of sanctions in response to what President Joe Biden called “major war crimes” committed by Russian forces in Ukraine.