The Russian currency reached a two-year high against the US dollar on Friday. The ruble strengthened after the country said it had managed to repay creditors in dollars while Russia tried to avoid default.
The country’s finance ministry said in a statement that it had made a $ 565 million Eurobond to be due this year, as well as a $ 84 million Eurobond to fall in 2024. Both payments were made in USD, according to the Ministry of Finance, because required by the contractual terms of the bond.
“The payments were made in the currency of the issue of the respective Eurobonds – in US dollars,” the Russian Finance Ministry said in a statement. “In this way, the obligations for servicing sovereign Eurobonds are fulfilled in compliance with the conditions set out in the issue documentation.
On April 6, Russia said it had made payments on these bonds in rubles, prompting S&P to announce three days later that Russia was defaulting on its foreign debt. Although payments in dollars are already overdue, Russia’s late payment in dollars serves as a last resort to avoid default.
Bond payments usually come with a 30-day grace period. For these bond payments, this grace period expires on May 4, so S&P may change its mind. S&P could not be reached immediately for comment on whether to cancel its declaration that Russia is overdue.
Russia has money to pay its debts. It simply lacks access to about half of those funds after the West imposed unprecedented sanctions on its foreign reserves totaling about $ 315 billion.
But Russia has apparently found a way to pay off hundreds of millions of dollars in debt without access to its frozen reserves. A spokesman for the US Treasury Department said the payment must have come from a new pile of money because it had not lifted its restrictions on Russia’s sanctioned dollars, according to Reuters.
The news sent the Russian ruble, which has been rising for two months, to a two-year high against the US dollar. One dollar can buy about 68 rubles on Friday, less than half the number it can buy in early March. At its peak on March 7, the ruble traded at 135 per dollar. Russia has managed to support the ruble despite global sanctions by raising interest rates, preventing Russian brokers from selling securities held by foreigners and demanding payment for gas and oil supplies in rubles, among other actions. These measures have allowed Moscow to artificially produce demand for the ruble, although the nation’s economy remains shattered.
Since then, the country has managed to reduce its dramatic rate hike, including another surprising rate cut on Friday.
– Claire Sebastian of CNN contributed to this report.
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