The economic sanctions taken by the West against Russia have led the Kremlin to take retaliatory measures. Among these, a law passed at the beginning of March 2022 authorizes the payment of debts in rubles, which represents a problem given that the Russian currency has been in free fall since the beginning of the year. But when it comes to sovereign debt, Russia has decided not to risk the worst.
$117 million in debt paid as requested
The rating agency Fitch had warned: if Russia decided to pay its creditors in rubles, this could, in fact, constitute a default for the country. A major risk for the Russian economy heavily sanctioned by the West following its attack on Ukraine, which led to a historic downgrade in its rating from all three major rating agencies.
But Fitch spoke in particular of a deadline: that of Wednesday March 16, 2022. Russia must pay $117.2 million in sovereign debt. However, the conditions of this loan simply did not allow payment in a currency other than the dollar.
Finally, the Kremlin decided not to tempt fate: Monday, March 14, 2022, Anton Siluanov, Minister of Finance, confirmed having sent the transfer order for the payment of this installment made ” in foreign currency “, he said on television.
The risk of default from Russia is not ruled out
If the payment of the 117.2 million dollars in Eurobond due on March 16, 2022 therefore seems to no longer represent a risk of default for Russia, this risk is far from being ruled out. In March 2022, Russia still has to repay $615 million, while in April 2022 it is $2 billion. Future Kremlin decisions will therefore be closely watched.
Overall, Russia owes nearly $40 billion in debt. While loans taken after 2014 and the annexation of Crimea have a financial guarantee, and those taken after 2018 can, by contract, be paid in rubles (for an equivalent amount in dollars), loans before 2014, such as the one maturing on March 16, 2022, must be paid in dollars. Failure to comply with this condition can therefore be interpreted as a default in payment, which Russia seems to want to avoid. The country has never been in default since 1917 and the Bolshevik revolution.