Russia’s finance ministry has stated that a temporary mechanism for repaying foreign currency debt had been approved, but warned that payments would be made in roubles if banks were unable to honour debts in the currency of issue due to sanctions.
Russia has been shut off from important sectors of the global financial markets as a result of Western sanctions over the events in Ukraine, sparking the country’s greatest economic crisis since the fall of the Soviet Union in 1991.
Russia’s finance ministry has accused foreign countries of wanting to force Russia into an “artificial default” through unprecedented sanctions over its war in Ukraine and said it would meet its debt obligations.
What they are saying
Finance Minister, Anton Siluanov said in a statement today that the action against Russia is to promote artificial default. He said, “The freezing of foreign currency accounts of the Bank of Russia and of the Russian government can be regarded as the desire of a number of foreign countries to organise an artificial default that has no real economic grounds.”
“Claims that Russia cannot fulfil its sovereign debt obligations are untrue,” Siluanov said, according to Reuters. “We have the necessary funds to service our obligations.”
Nevertheless, the Russian government is due to pay $117 million on two of its dollar-denominated bonds on Wednesday.
What you should know
- Several Russian banks have been barred from using the SWIFT international payments network, making it difficult to transfer funds outside of the country.
- If payments are not possible, Siluanov said, Russia “is ready to make payments in roubles” according to the exchange rate of Russia’s central bank on the day of the payment, including its Eurobond issued since 2018.
- Russian banking and financial systems have been dealt an unprecedented hit by Western sanctions imposed in response to Moscow’s war in Ukraine, with a major portion of the country’s foreign currency assets blocked.
- Russia has stepped up attempts to keep money out of the country and to defend the rouble, which has already plummeted in value versus the US dollar.
