Russia said on Wednesday it would begin repaying its foreign debt in rubles after the United States ended a waiver allowing Moscow to pay in Russian dollars.
The US Treasury announced on Tuesday that it was blocking the passage of sanctions imposed on Moscow after sending troops to Ukraine, pushing Russia closer to default.
“Note that the refusal to extend this license makes it impossible to continue the service of government foreign debt in US dollars, will be paid in Russian currency,” the finance ministry said in a statement in the Telegram.
The ministry added that using a Russian financial institution as a paying agent would “have the potential to convert them (the payments) into main currencies later.”
Punishment of Western sanctions on Russia has largely alienated the country from the international financial system, including blocking Moscow’s ability to access funds in US banks to pay off its foreign lenders.
The U.S. move cancels the final waiver, forcing President Vladimir Putin’s government to pull out of the war on foreign exchange reserves in exchange for money.
Russia’s finance minister, Anton Silvanov, said in a statement that the current situation was “artificially created by a friendless country.”
He said it “primarily violates the rights of foreign investors in Russian debt instruments”.
Silvanov stressed that the situation was “similar to that of 1998”, when Russia defaulted on its domestic ruble-defined debt amid a widespread financial crisis.
“Now we have the money and the willingness to pay,” the minister said, adding that the move would not affect the quality of life of Russians.
US Treasury Secretary Janet Yellen said last week that “if Russia does not find a legal way to pay this … they are technically the defaulters in their debt.”
The Russian government has tried to pay in local currency, but many bonds do not allow payments in rubles.
The term of the loan service after May 27 is 100 million euros for interest on two bonds: one requires payment in dollars, euros, pounds or Swiss francs only; Another ruble can be paid.
According to a report by Reuters and the Wall Street Journal on Friday, the Russian Ministry of Finance hastily transferred funds out of the country to make payments and avoid defaults.
About $ 400 million in interest is due by the end of June.
After a 15- to 30-day grace period after a missed payment, the country is likely to be declared as default, its financial situation will deteriorate further and lenders will be allowed to take legal action to recover funds.
The country last defaulted on foreign currency debt in 1918, when Vladimir Lenin, the leader of the Bolshevik revolution, refused to accept the obligation to rule the deposed Tsar.
(Except for the title, this story was not edited by NDTV staff and was published from a syndicated feed.)