The Russian Ministry of Finance announced on Wednesday that it had paid in rubles a debt contracted in dollars, after the refusal of a foreign bank to make payment in US currency, which exposes Russia to default.
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“A foreign bank refused to execute instructions” to pay an amount of 649.2 million dollars due on April 4, the minister said in a statement. Therefore, “it was necessary to resort to a Russian financial institution to make the necessary payments (…) in the currency of the Russian Federation.”
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The Finance Ministry did not specify whether the payment in rubles was accepted. Although many analysts claim that Russia is headed for a defaultthe country has avoided such a situation so far thanks to the use of foreign currency held by Moscow in other countries to pay their foreign debts.
But on Tuesday, the US Treasury Department announced it would not authorize Russia to repay its debt with dollars held in US banks, forcing pressure on Moscow and increasing the risk of a default.
“There is no basis for a real default,” defended the Kremlin spokesman, Dmitri Peskov, before the press. “Russia has all the necessary resources to satisfy its debt,” he added. For Timothy Ash, an analyst at Blue Bay Asset, “it is difficult for Russia to avoid a
sovereign default.
“A default it’s a default. The markets will judge it that way. Investors weren’t paid and they will remember that,” he argued.
The huge Russian reserves abroad, equivalent to 300,000 million dollars, were frozen in the framework of international sanctions in response to its military intervention in Ukraine. AFP
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