The risk of the Russian government announcing a moratorium on payments, exacerbated by Western sanctions on the Kremlin, seemed to be receding, at least temporarily, yesterday, after Moscow paid interest on its government debt.
Russia had until March 16 to pay $ 117 million in interest to its creditors on two bonds.
The Russian Ministry of Finance stated that it had paid the required amount, stressing in a press release that it published that “the payment order for the payment of interest on bonds (…) with a total value of 117.2 million dollars (…) was executed”.
The US bank JPMorgan did indeed receive an amount from the central bank of Russia, a source informed the French Agency on Thursday, informing about it, without specifying its amount.
The Wall Street Bank consulted with US authorities to ensure that sanctions imposed after the Russian invasion of Ukraine were not violated and, after receiving the green light, transferred the money to US bank Citigroup.
It is now up to Citigroup to distribute the required amounts to the bondholders. It has 30 days to do so, as otherwise Moscow will be deemed to have defaulted on its external debt.
When contacted by Agence France-Presse, neither JPMorgan nor Citigroup wanted to comment on the transaction.
The rating agency S&P downgraded the debt of the Russian government again last night, from the CCC to the CC, in other words, just two notches above the level of the states that consider themselves bankrupt.
Investors did not receive the required payments in dollars the day before yesterday Wednesday “due to technical difficulties associated with international sanctions,” the house justified.
S&P acknowledged, however, that the Russian government had indeed tried to make the transfers and that it had a 30-day grace period.
However, even if the interest due due the day before yesterday is finally paid, similar technical difficulties will arise in future payments, which puts Russia in a “vulnerable” position, increasing the risk of “non-payment of its debt.”
Western sanctions in retaliation for the Russian invasion of Ukraine paralyzed part of Russia’s banking and financial system and led to the collapse of the ruble.
They include, among other things, the freezing of Russian investments abroad, worth about $ 300 million.
This raises concerns that Moscow will not be able to meet its obligations, to repay foreign currency debts due in March and April, and will therefore fall into a state of default. The rating agency Fitch warned last week that this risk is “immediate”.
Russia had to wait twelve years to start borrowing again from the international capital markets after its bankruptcy in 1998, when its economy was destabilized by the financial crisis triggered in Asia.
Since then, Moscow has been able to secure progressively extremely low interest rates and foreign exchange reserves of more than $ 600 billion, thanks to oil and gas sales.
The Russian Ministry of Finance clarified earlier yesterday that it had paid the required funds to a “foreign bank” on Monday. That is, theoretically, $ 73 million for interest-bearing bonds whose maturity will be recorded in 2023 and another $ 44 million for interest-bearing bonds whose maturity will be recorded in 2043.
He also stressed that the payment was made in dollars, not rubles – an important detail, given that Moscow has repeatedly threatened to repay its debts in Russian currency.
“Russia has all the necessary means and possibilities to avoid bankruptcy, there can be no bankruptcy. “If there is, it will be exclusively artificial,” Kremlin spokesman Dmitry Peshkov told a news conference yesterday.
According to a note from JPMorgan issued in early March, the next deadline for interest payments from Moscow is March 21 and the amount is $ 66 million.
However, contrary to the deadline set, Russia this time has the contractual right to pay in currencies other than the dollar, without excluding the possibility of payment in rubles.
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