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Moscow says it made debt interest payment, avoiding default

MOSCOW (AFP) – Russia’s finance ministry said yesterday it had carried out interest payments on two foreign bonds, avoiding default for now after it was hit by unprecedented Western sanctions over Ukraine.

“The payment order… worth USD117.2 million due on March 15 was sent to a correspondent bank account on March 14 and was executed,” the ministry said in a statement.

The ministry added that it will provide “additional information” on the crediting of the funds.

On Wednesday, Russia said it asked an American bank to process the payments for two-dollar denominated bonds.

Sanctions over Russia’s operation in Ukraine have targetted USD300 billion of its foreign currency reserves held abroad. Without access to these funds, concern has mounted that Russia could find itself forced to default.

Finance Minister Anton Siluanov had warned the debt may be paid in rubles if necessary. The interest payments due this week had to be made in dollars.

A payment in rubles would constitute a default at the end of a 30-day grace period, according to Fitch Ratings.

But analysts at investment firm JPMorgan said United States (US) sanctions should not restrict Russia’s ability to service its debt. The US Treasury also said interest payments to American entities were “permissible through May 25”.