The Russian finance ministry disclosed on Monday, 14th March that it had approved a temporary procedure for repaying foreign currency debt.
The ministry however warned that the payments may be made in Roubles, the country’s local currency. According to the ministry, this is due to sanctions that prevent banks from honouring debts in the currency of issue.
Following Russia’s invasion of Ukraine, the country has been served a number of sanctions especially Western sanctions that have cut Russia off from key parts of global financial markets.
According to experts, these sanctions have triggered Russia’s worst economic crisis since the 1991 fall of the Soviet Union.
Finance Minister Anton Siluanov, however, refuted claims that Russia can not fulfil its debt obligation. Speaking to newsmen, Anton said: “Claims that Russia cannot fulfil its sovereign debt obligations are untrue. We have the necessary funds to service our obligations.”
Investors King gathered that the Russian government is due to pay $117 million on two of its dollar-denominated bonds on Wednesday, 16th March.
While Russia may have started and approved the temporary procedure to allow banks to make payments in its local currency, the possibility of those payments going through would also depend on sanctions that have already been served to Russia. Recall that a number of banks have also been banned from the SWIFT international payments network which has drastically affected efforts to move money outside of Russia.
Also, if payments are to be made in Eurobond repayments in Roubles, this may also be a heavy loss for Russia as we have seen the Rouble dive to record lows in recent weeks.
Anton also claims that “The freezing of the central bank and government’s foreign currency accounts can be seen as a desire from several Western countries to organise an artificial default.”
The sanctions have undoubtedly affected Russia and the world can also feel the ripple effects of the Russian invasion of Ukraine. The effect of these sanctions has also informed a number of companies to pull out of the Russian market – not just because they are against the invasion of Ukraine but because the ease of doing business in Russia is becoming a blurred line for many companies.
