In the near term, Russia has two foreign-currency bond payments due on Friday, both of which have clauses in their contracts that allow for repayment in other currencies if “for reasons beyond its control” Russia is unable to make payments in the originally agreed currency.
Russia owes about $71 million in interest payments for a dollar-denominated bond that will mature in 2026. The contract has a provision to be paid in euros, British pounds and Swiss francs. Russia also owes 26.5 million euros ($28 million) in interest payments for a euro-denominated bond that will mature in 2036, which can be paid back in alternative currencies including the ruble. Both contracts have a 30-day grace period for payments to reach creditors.
The Russian finance ministry said on Friday that it had sent the funds to its payment agent, the National Settlement Depository, a Moscow-based institution, a week before the payment was due.
The finance ministry said it had fulfilled these debt obligations. But more transactions are required with international financial institutions before the payments can reach bondholders.
Adam M. Smith, who served as a senior sanctions official in the Obama administration’s Treasury Department, said he expected that Russia would most likely default sometime in July and that a wave of lawsuits from Russia and its investors were likely to ensue.
Although a default will inflict some psychological damage on Russia, he said, it will also raise borrowing costs for ordinary Russians and harm foreign investors who were not involved in Russia’s invasion Ukraine.
“The interesting question to me is, What is the policy goal here?” Mr. Smith said. “That’s what’s not entirely clear to me.”
Alan Rappeport reported from Washington, and Eshe Nelson from London.
Article source: https://www.nytimes.com/2022/05/24/us/politics/russian-debt-treasury.html
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