Russia says it has made overdue payments on its external debt to avert a potential default next week.
The interest payments totaling $650 million were made in dollars, it said.
On Friday, Russia’s central bank governor Elvira Nabiullina told journalists that “there is no question of default” but acknowledged that there were “difficulties with payments”.
Questions had been raised as to whether Moscow would be able to meet its commitments as a May 4 deadline loomed.
Payments on the country’s $40 billion in international bonds must be made in the currency originally marked on the bonds.
But Russia has lost access to much of its reserve funds held in foreign banks because of sanctions imposed by the West and its allies following its invasion of Ukraine.
Earlier this month, Moscow proposed fulfilling its obligations related to these special bonds in rubles, a proposal rejected by Moody’s Investors Services.
The rating agency said paying in anything other than dollars would amount to a default, which would have significant implications for the Russian economy, including the ability to borrow in the future.
- Will Russia be able to pay its debt?
- The war will almost halve Ukraine’s economy
Russia last defaulted on ruble-denominated debt in 1998, when the country was going through a financial crisis.
It defaulted on its foreign currency debt in 1918 after the Bolshevik Revolution. At the time, Vladimir Lenin, the revolutionary leader, refused to recognize the debts inherited from the tsarist regime.
A 30-day grace period expires on May 4 after Russia initially failed to make payments on the two bonds in question. By that time, investors must have received the money owed to them.
Russia said it made the payments to the London branch of Citibank, one of the banks responsible for making the payments. A US official said the payments were made, but not with frozen US dollar assets.
Russia’s difficulties are likely to increase before May 25, when sanctions rules are set to change, further narrowing the question of whether Western agents can process Russian debt payments.
Russia cut interest rates by 3% on Friday to try to boost the flagging economy. The policy rate, which was raised immediately after the invasion, is now 14%.
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