(New York) The risk of a Russian default, raised after the imposition of heavy Western sanctions against the Kremlin, appeared to be receding at least temporarily on Thursday following the payment of interest owed by Moscow on its debts. .
Posted at 6:53 p.m.
Russia had until March 16 to pay $117 million tied to two bonds.
The Russian Finance Ministry said it had disbursed the necessary money, saying in a statement that “the payment order on the payment of bond interest […] worth a total of $117.2 million […] was executed”.
The American bank JPMorgan has received a payment from the Russian Central Bank in this direction, confirmed to AFP on Thursday a source close to the file, without giving details on the amount of the sum received.
The Wall Street firm consulted with US authorities to ensure it did not violate sanctions imposed following the invasion of Ukraine and, after receiving their green light, handed over the money to the US bank Citigroup.
It is now up to Citigroup to distribute the required sums to bondholders. It has 30 days to do so before Russia is considered in default on its foreign debt.
Contacted by AFP, neither the JPMorgan group nor Citigroup wished to comment on this operation.
The rating agency S&P, at the end of the day Thursday, again downgraded the rating of Russian debt, from CCC- to CC, placing it now two notches from the rating of countries in default of payment.
The investors had not received their payment in dollars due on Wednesday “due to technical difficulties related to international sanctions”, justified the agency.
S&P acknowledges, however, that the government did attempt to make the transfers and that it has a 30-day grace period.
But even if the interest payment due on Wednesday has finally been made, similar technical difficulties are to be expected for the next payments, which places Russia in a situation of “high vulnerability to non-payment of the debt”.
Payment in dollars
Western sanctions taken in retaliation for the Russian attack on Ukraine crippled part of the country’s banking and financial system and caused a collapse of the rouble.
They include, among other things, the freezing of Russian reserves held abroad, amounting to around 300 billion dollars.
This raises fears that Moscow will no longer be able to honor several debt payment deadlines in foreign currencies during March-April, and is therefore in a situation of default. The financial rating agency Fitch warned last week that such a risk was “imminent”.
It took twelve years for Russia to be able to return to borrow on the markets after defaulting on its domestic debt in 1998, when its economy was destabilized by a financial groundswell from Asia.
Moscow has since endeavored to build up an irreproachable financial health, with a very low debt ratio and reserves of more than 600 billion dollars built up thanks to oil revenues.
The Russian Ministry of Finance had specified earlier in the day on Thursday that it had sent the required funds to a “foreign bank” on Monday: theoretically 73 million dollars for interest linked to a bond maturing in 2023 and 44 million linked to a bond maturing in 2043.
The Russian government also stressed that the payment had been made in dollars, and not in rubles, an important clarification since Moscow has repeatedly threatened to repay its foreign debts in Russian currency.
“Russia has all the necessary means and potential to avoid a default, and no default can take place. If a defect occurs, it will only be of an artificial nature,” commented Kremlin spokesman Dmitry Peskov during a press briefing.
According to a note from JPMorgan dating from the beginning of March, the next payment of interest due from Moscow is scheduled for Monday, March 21 and concerns 66 million dollars.
But, contrary to the deadline which has just been honoured, Russia this time has the contractual right to pay in currencies other than the dollar, including the rouble.