Russia’s treasury claims that it made critical $117 million payments on interest owed from two dollar-denominated eurobonds enabling it to avoid the country’s first default on foreign debt since the 1917 revolution. The Finance Ministry in Moscow says that the funds were transferred to payment agent Citibank, based in London. The Post has reached out to Citibank seeking comment. Timothy Ash, a senior emerging markets sovereign strategist for London-based BlueBay Asset Management, told The Post that he’s taking a wait-and-see approach. “We’ll have to see if [the payments] reach the bondholders,” he said. “We don’t know yet if the payments have been made.” “If they indeed did pay, they realized the consequences of default are pretty devastating for Russia,” according to Ash. “Once they go into default, coming out of default will be very difficult for them.” The last time Russia defaulted on its domestic debt was 1998, but it was able to recover thanks to Western governments’ readiness to extend rescue loans. “This time around, the West will have absolutely no interest in helping Russia come out of default,” Ash said. “For bondholders to negotiate with sanctions entities would be pretty difficult.” Russian Finance Minister Anton Siluanov told state-run media outlet Russia Today that the country fulfilled its obligations to foreign creditors, though he added that the payments may not go through since they’re at risk of being blocked by the US. A spokesperson for the US Treasury Department told CNN that Washington would allow the payments to go through. Siluanov said the “possibility or impossibility of fulfilling our obligations in foreign currency does not depend on us.” “We have the money, we made the payment, now the ball is in America’s court.” Despite Siluanov’s claims, there is uncertainty as to whether investors will actually get their money from the Kremlin since the Russian government used frozen foreign assets to make the payment. Those assets were subjected to sanctions imposed by the US and the European Union after President Vladimir Putin launched an invasion of Ukraine. The war, which has turned Western public opinion firmly against Russia, is entering its fourth week as Russian forces remain bogged down in the face of fierce resistance from the Ukrainian military. Siluanov said that the US and EU sanctions have frozen some $315 billion worth of foreign reserves. If the US blocks the payment, then Russia could try to pay in rubles, but the currency has been so devalued to the point where the country would have no choice but to default on its debt, according to credit ratings agency Fitch. Dmitry Peskov, the spokesperson for the Kremlin, said any default would be “entirely artificial” since Russia had the money to fulfill its debt obligations. “The fact is that from the very beginning we have said that Russia has all the necessary funds and potential to prevent a default — there can be no defaults,” Peskov said, according to Reuters. “Any default that could arise would have an entirely artificial character.” Ash told the Post that whether a default is “artificial” doesn’t matter, since the Kremlin would still be in default. “Perhaps they should have thought about that before they invaded Ukraine,” he said.
