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Can Russia keep paying its debts and avoid default? It’s complicated.


Russia claims to have made good on $117 million in interest payments due this week on two dollar-based bonds. But its status over sanctions could put those or future payments in limbo and risk Russia defaulting on foreign debt for the first time in more than a century. The foreign currency reserves Russia has to pay its debts are technically frozen over sanctions implemented when the country invaded Ukraine.

“We have the money, we made the payment, now the ball is in America’s court,” Russian Finance Minister Anton Siluanov said in an interview with state media.

The U.S. Treasury Department said U.S. sanctions do not prevent the frozen funds from being transferred to pay debts. However, bondholders reported not receiving money by the deadline. On Thursday, Reuters reported two bondholders had received payments a day late while others were still awaiting payment.

Technically, Russia has a 30-day grace period to reach a deal before an official default. The clock started ticking Wednesday when the $117 million in interest payments were due.

Russia has said it’ll pay in rubles if its frozen dollars are blocked, but that action would almost certainly trigger default, according to Fitch Ratings. Dollar-based bonds must be paid back in dollars.

On Thursday, S&P Global Ratings cut Russia’s credit rating again, indicating the country’s debt is “highly vulnerable to nonpayment.”

If Russia were to default on its foreign debt, it would be the first time since after the Bolshevik Revolution in 1918. More recently, Russia defaulted on local-government debt in 1998 as the post-Soviet economy struggled to gain ground.

SIMONE DEL ROSARIO: RUSSIA CLAIMS TO HAVE MADE GOOD ON A 117-MILLION DOLLAR DEBT PAYMENT DUE THIS WEEK. BUT WILL IT BE GOOD ENOUGH TO AVOID DEFAULTING FOR THE FIRST TIME IN MORE THAN A CENTURY? THE SHORT ANSWER: IT’S COMPLICATED.

RUSSIA SAID IT AUTHORIZED THE HEFTY INTEREST PAYMENTS ON TWO DOLLAR-BASED BONDS. THE PROBLEM? RUSSIA’S FOREIGN CURRENCY RESERVES, INCLUDING DOLLARS, ARE TECHNICALLY FROZEN OVER SANCTIONS.

RUSSIA’S FINANCE MINISTER TOLD STATE MEDIA: WE HAVE THE MONEY, WE MADE THE PAYMENT, NOW THE BALL IS IN AMERICA’S COURT. ‘AMERICA’S COURT,’ THE TREASURY DEPARTMENT, SAID U-S SANCTIONS DO NOT PREVENT THESE FROZEN FUNDS FROM BEING TRANSFERRED TO PAY DEBTS. BUT BONDHOLDERS REPORT THEY HAVEN’T SEEN THE MONEY.

TECHNICALLY, RUSSIA HAS A 30-DAY GRACE PERIOD TO GET A DEAL DONE BEFORE A DEFAULT, THE CLOCK STARTED WEDNESDAY.

THE COUNTRY SAYS IT’LL PAY IN RUBLES IF ITS FROZEN DOLLARS ARE BLOCKED, BUT THAT ACTION WOULD ALMOST CERTAINLY TRIGGER DEFAULT. DOLLAR-BASED BONDS HAVE TO BE PAID BACK IN DOLLARS. TRANSLATION: YOUR RUBLES ARE NO GOOD HERE.

FROM NEW YORK FOR JUST BUSINESS, I’M SIMONE DEL ROSARIO.