Payback time
Today is the beginning of what is likely a long battle over Russian debt, with $117 million in interest payments due on the government’s dollar-denominated bonds. If Russia fails to make the payments, that could be its first default on foreign debt since the 1917 Bolshevik Revolution. The Times’s Eshe Nelson, Alan Rappeport and DealBook’s Lauren Hirsch took a look at what’s at stake — and what could happen next. https://www.nytimes.com/2022/03/15/business/russia-debt-bond…
The state of play: The Russian government owes about $40 billion in bonds denominated in dollars and euros. Half of that debt is owned by foreign investors. Russian government bonds were considered investment grade as recently as a few weeks ago, and were included in indexes used to benchmark other funds.
The big question: Will Russia pay in dollars or rubles? Russia says that sanctions cutting it off from the international financial system mean that it can only pay in rubles, and that doing so is an acceptable means of payment given the circumstances. Others disagree, and say that paying dollar-denominated bonds in rubles would constitute a default. Regardless, the payments due today have a 30-day grace period, so a default wouldn’t technically happen until mid-April.
“The Russian government made a $117 million interest payment to foreign bondholders on Wednesday, averting what would have been its first foreign debt default”
“Russia transferred the funds in U.S. dollars to JPMorgan Chase, which acted as an intermediary or correspondent bank between Moscow and the investors who own the Russian government bonds”
This is the relevant paragraph in the cited article:
“On Wednesday, Russian Finance Minister Anton Siluanov told the RIA Novosti news agency that the payments might not reach foreign bondholders, because the government’s foreign currency accounts had been frozen by U.S. sanctions.”
Actually, this is the relevant part of the article:
"JPMorgan, which declined to comment, then forwarded the Russian payment to Citibank, which is responsible for distributing the interest to individual financial institutions.
U.S. sanctions are no bar to Russia’s dollar payments. The Treasury Department issued guidance earlier this month, allowing U.S. investors to receive interest on Russian debt through May 25.
News of the payment ended a period of uncertainty about the Russian government’s interventions and its ability to remain in compliance with the terms of its bond offerings, which require periodic interest payments in the form of U.S. dollars."
You will note the money is already being distributed and the Treasury has already ruled this legal.
The Russian propaganda statement was just another attempt to obfuscate the situation and cause concern and worry.
You will note the money is already being distributed and the Treasury has already ruled this legal.
IOW, if it further drains their accounts, so much the better.