Russia makes last-minute bond payment to avoid default | Economic news

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By KEN SWEET and FATIMA HUSSEIN, Associated Press

NEW YORK (AP) — Russia avoided a debt default on Friday by making a last-minute payment using its precious dollar reserves located outside the country, U.S. Treasury officials said.

The amount of the payment was not disclosed, but earlier this month the Russian Finance Ministry said it had attempted to make a $649 million payment due April 6 for two bonds to a anonymous US bank – previously reported as JPMorgan Chase.

At this time, the increased sanctions imposed for Russia’s invasion of Ukraine prevented the payment from being accepted, so Moscow attempted to effect payment of the debt in rubles.

Investors and ratings agencies, however, did not expect Russia to be able to convert rubles into dollars before a 30-day grace period expires next week, suggesting that Moscow will headed for a historic default on its debt. Russia has not defaulted on its foreign debts since the Bolshevik Revolution of 1917, when the collapse of the Russian Empire led to the creation of the Soviet Union.

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Treasury officials, who declined to be named because they were not authorized to speak officially, said Russia had tapped into its foreign exchange reserves currently outside the country to carry out the Friday payment. Since the United States sanctioned the Central Bank of Russia at the start of the conflict, Russia had only the option of using either new revenues from activities such as oil and gas sales, or reserves foreign currencies existing outside the country.

The United States has tried to force Russia to use its foreign currency reserves – or any revenue from oil and gas sales – to deplete the country’s financial resources.

According to reports, Russia used its accounts with Citigroup in London to make the payments. A Citi spokeswoman declined to comment on the information.

Hussein reported from Washington.

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