The Russian Finance Ministry has denied all accusations that it has defaulted on its international debts, calling it a “farce”, but acknowledged that it had encountered difficulties paying two credit agreements on time, according to the Associated Free Press (AFP).
To date, two Russian repayments failed to reach creditors before a 26 June deadline. Dmitri Peskov, Spokesperson for the Kremlin, states that the payments had been made ahead of time in May, in foreign currency, but had been blocked by intermediary Euroclear.
“The failure of investors to obtain money is not the result of non-payment, but it is caused by the action of third parties, which is not directly considered…as a default,” Peskov insisted.
Feeling the pinch
International sanctions placed on Russia have prevented many of its financial institutions from paying interest repayments in rubles and conducted many operations on the international financial market.
Russia states that on 20 May, it paid two outgoing Eurobond coupon debts amounting to $71.25 million and $26.5 million, seven days before a deadline in order to prevent them being blocked by new sanctions set to come into place on 25 May. If creditors do not receive these amounts on 26 June, Russia would find itself in a default.
This incident marks the first time since 1998 that Russia has defaulted on foreign debt and is a bad look for the Russian economy. The Kremlin had attempted to avoid the default, which is a blow to the nation’s prestige as a stable economic powerhouse.
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Peksov has warned the West against expropriating frozen Russian assets under the pretext of sanctions, which he says are “illegitimately frozen” and any use of which would be “practically theft.”
Russia has stated that it will pay off ongoing debts in rubles, due to its inability to use foreign currency due to international sanctions, which would also be constituted as default by international financial institutions and creditors. Peskov has accused other nations of preventing Russia from making payment to create the conditions for an artificial default.
The top three major international financial rating institutions no longer rank Russia and it is now down to the Credit Derivatives Determinations Committees to decide whether Russia’s late payment constitutes a default.
