Russia will repay its debt in rubles, the Russian Finance Ministry said on Wednesday, the United States having decided to end from Wednesday an exemption allowing Moscow to pay its debts in dollars.
“Since the refusal to extend this license makes it impossible to continue to honor the foreign debt in dollars, the repayments will be made in Russian currency with the possibility of converting them afterwards into the original currency via the National Settlement Depository (NSD) which will serve as ‘paying agent,’ the ministry said in a statement.
The NSD is a centralized Russian body responsible for depositing financial securities traded in the country.
“The Russian Ministry of Finance, as a responsible borrower, assures of its willingness to continue to honor and repay all its financial obligations,” the statement said.
“The current situation has nothing in common with the situation in 1998, when Russia did not have enough funds to repay its debts,” Finance Minister Anton Silouanov said in the statement. “Today we have the money, and the will to pay is there too”.
“This situation created artificially by an unfriendly country will have no effect on the lives of Russians,” he said.
On Tuesday, the US Treasury announced that it had decided to end, from 12:01 a.m. Wednesday Washington time, an exemption allowing Moscow to pay its debts in dollars.
In place since the start of Western sanctions against Russia, in retaliation for the war in Ukraine, this exemption had allowed Moscow to escape default.
It was decided by Washington to “allow an orderly transition and investors to sell their securities,” said US Treasury Secretary Janet Yellen last week.
Joe Biden’s minister then indicated that this exemption would “probably” end.
Washington’s measure takes effect two days before Moscow’s next payment deadline, which is for just over $100 million in interest on two bonds.
According to the Wall Street Journal citing the official Russian news agency Tass, the authorities have already paid the interest.
Besides the May 27 deadline, the Russian government still has to honor 12 payments by the end of the year.
Russia could already no longer repay its debt with dollars held in American banks, under the reinforced sanctions imposed by the United States on April 5.
The governor of the Russian central bank, Elvira Nabioullina, admitted on April 29 that Moscow was facing “payment difficulties” but she refused to talk about a potential default.
Russia’s external debt represents, according to its Ministry of Finance, around 4,500 to 4,700 billion rubles (some 78 to 81 billion dollars at the current rate), or 20% of the total public debt.