Russia prevented its default on Friday by making last-minute payments using its valuable dollar reserves outside the country, US Treasury Department officials said.
The amount was not disclosed, but earlier this month Russia’s finance ministry said it had tried to make a $ 649 million payment due on April 6 to two bonds to an unnamed US bank, formerly reported by JPMorgan Chase. .
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At the time, tense sanctions imposed on Russia’s invasion of Ukraine prevented the payment from being accepted, so Moscow tried to pay off the debt in rubles. The Kremlin, which has repeatedly said it is financially viable and willing to continue paying its debts, says the emergency gives them the legal basis to pay in rubles instead of dollars or euros.
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However, investors and rating agencies disagreed and did not expect Russia to be able to convert rubles into dollars before the 30-day grace period expires next week, leading to speculation that Moscow is heading for a historic debt default.
Russia did not default on its foreign debt after the Bolshevik revolution of 1917, when the collapse of the Russian Empire led to the creation of the Soviet Union. The governing body on credit default swamps – insurance contracts designed to protect against default – has already ruled that Russia is in default.
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Finance Ministry officials, who declined to be named because they were not authorized to speak in the minutes, said Russia had used its foreign exchange reserves, which are currently outside the country, to make payments on Friday. Because the United States sanctioned Russia’s central bank at the start of the conflict, Russia only had the option of using either new revenue from activities such as oil and gas sales or existing foreign exchange reserves outside the country.
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The United States is trying to force Russia to use its foreign exchange reserves – or any proceeds from oil and gas sales – to deplete the country’s financial resources.
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Russia’s finance ministry said it had made the payments at Citigroup’s London branch. A Citi spokeswoman declined to comment on whether the bank had processed the transaction.
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