Russia reportedly made a pair of overdue debt payments in US dollars on Friday – a move that came as the Kremlin scrambles to avoid what would be its first default on foreign obligations since World War I.
Russia’s Finance Ministry said it made a $564.8 million payment on a 2022 on a dollar-denominated bond said to mature this year and an $84.4 million payment on another bond set to mature in 2042.
The decision to make the payments in dollars marked a reversal for the Kremlin, whose officials previously indicated they would cover the debt in Russian rubles.
The ministry said it funneled the money for the bond payments to Citibank’s London branch – though it’s not clear if the funds will be cleared as the US and other western nations enact crippling economic sanctions on Russia over the invasion of Ukraine, Reuters reported.
Credit agency Moody’s previously warned that Russia had violated the terms of the two Eurobond contracts by attempting to pay in rubles. The installments were due on April 4.
In a statement earlier this month, Moody’s noted the use of rubles “represents a change in payment terms relative to the original bond contracts and therefore may be considered a default” unless Russia rectified the situation within a 30-day grace period ending on May 4.
“The bond contracts have no provision for repayment in any other currency other than dollars,” the credit agency added.
Russia has not defaulted on its foreign debt since the Bolshevik revolution of 1917, according to Reuters. The country’s last default of any kind occurred in 1998.
Russia has narrowly avoided a default on multiple occasions since the Ukraine war began in late February.
US-led sanctions against the Kremlin included the ejection of Russian banks from the SWIFT international payments system, as well as other debilitating measures meant to increase pressure on Russian President Vladimir Putin and his allies.
Russia has responded with economic penalties of its own — including a requirement that so-called “unfriendly” nations in Europe pay for Russian energy in rubles.
In March, Russian officials said roughly $300 billion of its $640 billion in gold and foreign currency reserves were frozen and inaccessible.
The Biden administration previously blocked Russia from making more than $600 million in sovereign debt payments using reserves held at American banks.