Russia says it paid off debt, but creditors still fear default

Russia said on Thursday it had repaid debts that were due this week, but the announcement did not end the wait for what could be Moscow’s first foreign borrowing default in more than a century, as creditors claim they have not yet received the funds.

Russia was due on Wednesday to pay $117 million in coupons on two dollar-denominated sovereign bonds, seen as the first test of whether Moscow would honor its obligations after Western sanctions were imposed.

The country has a 30-day grace period after the Wednesday deadline.

Sanctions over the Ukraine war have eliminated Russia from the global financial system and blocked most of its gold and foreign currency reserves, while Moscow has adopted countermeasures in response — all of which are complicating payments.

Russia’s Ministry of Finance said on Thursday that the order to pay the $117 million had been fulfilled, and that it would update the market separately on whether the payment was deposited into the Citibank paying agent’s account.

Citi’s London arm declined to comment.

In turn, a number of creditors and sources familiar with the situation in Asia and Europe said the funds had not yet been received by creditors.

The Ministry of Finance had planned to send the equivalent volume of the interest payment in rubles if the dollar payment did not reach foreign bondholders, something the credit agency Fitch said would represent a sovereign default if not corrected within the period of lack.