Russia Sends Further $66 Million in Interest Payments, Avoiding Default

  • Russia has sent a $66 million bond payment as it continues to meet its obligations to foreign creditors.
  • JPMorgan, Russia’s foreign correspondent bank, has processed payment in dollars, according to a person familiar with the matter.
  • Speculation grew last week that Russia may be about to default on its debts, as tough sanctions make it more diffcult to pay up.

JPMorgan processed an interest payment on a Russian foreign bond Monday, according to a person familiar with the matter, as the country continued to meet its obligations to creditors.

The person said the payment was made in dollars, a development that will quell fears among other bondholders that Russia may send them rubles.

Russia’s finance ministry said Monday that the $66-million coupon payment on the $3 billion bond — which matures in 2029 — had been made in full.

Moscow has so far defied the expectations of many investors and kept up its payments on its foreign debt, despite Western government slapping tough sanctions on Russia following its invasion of Ukraine in late February.

Last week, speculation grew that Russia would default on its foreign bonds for the first time since 1918, when the new communist government refused to pay the Tsar’s debts.

Russia’s Finance Minister Anton Siluanov said the government may be forced to pay dollar- or euro-denominated debt in rubles. He said sanctions had cut the country off from roughly half of its $640 billion of foreign currency reserves.

Yet Russia paid $117 million of interest payments on two bonds last week, alleviating concerns about a default.

The payment was slightly delayed, however, as JPMorgan, the government’s foreign correspondent bank, sought the green light from US officials to process the payment.

The person familiar with the matter said JPMorgan again sought approval from the US to process the latest $66 million payment, which was due Monday. JPMorgan declined to comment.

Russia has a number of payment deadlines on its roughly $40 billion of foreign sovereign debt coming up that could cause trouble for the government.

It must pay up another $4.5 billion this year, including $549 million this month. It faces a major test when a $2 billion bond matures on April 4.

Credit ratings agency S&P has said that technical difficulties, stemming from sanctions, are likely to afflict Russian bond payments in the coming weeks.

S&P said last week: “At this point, we consider that Russia’s debt is highly vulnerable to nonpayment.”

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