Russia Russia accuses US sanctions of driving insolvency – US: “Sanctions will not stop Russia from paying its debts”

Russian interest on a two-dollar loan matured yesterday Wednesday. The total amount payable would have been 117.2 million, but according to Reuters the money did not come to the accounts of the bondholders by the time the banks close.

Russia now has 30 days left to pay interest, or it is considered insolvent.

Russian Minister of Economy Anton Siluanov has said the country has issued payment orders for interest, but said it is uncertain whether the payments have gone through. He blames U.S. sanctions for driving the country into insolvency.

“We have the money, we paid the fees, now the ball is on the other side, first with the US authorities,” Siluanov said in an interview with state media RT Wall Street Journal by.

He has previously said that payments can be made in rubles if payment in foreign currency is not successful.

However, according to credit rating agency Fitch, an attempt to pay dollar debts in rubles would also lead insolvencysays the American media Bloomberg.

Also the President of Russia Vladimir Putin blamed Europe and the United States for the situation on Wednesday.

In theory Russia has a lot of money to pay off its debts. Before the start of the large-scale war in Ukraine, it had amassed $ 630 billion in foreign exchange reserves, the Wall Street Journal notes.

However, US sanctions against the Russian central bank and the Ministry of Economy have raised doubts about what Russia can do with its funds.

The United States banned payments with the Russian Central Bank or the Ministry of Economy, but subsequently allowed banks, as an exception, to receive payments on Russian debt in currencies denominated in bonds.

Payment of interest on bonds issued by the Central Bank of Russia, the National Investment Fund or the Ministry of Finance before March 1 is allowed until May 25, the U.S. Treasury Department said.

Thereafter, the receipt of interest, dividends or debt payments on debts and shares of Russian state institutions requires the permission of the Ministry.

“U.S. sanctions on Russia will not prevent Russia from paying off these debts,” the U.S. Treasury Department commented on Wednesday, according to the Wall Street Journal.

Russia was last insolvent in 1918.

With regard to domestic currency-denominated ruble loans, Russia last became insolvent in 1998. At that time, the effects of the Russian debt crisis spread around the world.

Among other things, the crisis led to the liquidation of the hedge fund Long-Term Capital Management and demanded a rescue package organized by the US Federal Reserve.

Although Russia’s widespread invasion of Ukraine has had a significant impact on the market, the official designation of the country as insolvent will not necessarily lead to wider market tuberculosis, the Wall Street Journal estimates.

Russia’s share of the global debt market is small, and many companies have already written down their Russian bonds. to a very low level.

Yesterday there is now a thirty-day grace period to pay the overdue interest. Russia could be declared insolvent on foreign currency loans no earlier than April 15th.

Insolvency in domestic foreign currency loans, on the other hand, could threaten Russia even more quickly.

Russia failed to pass on payments to foreign bondholders on March 2, the Wall Street Journal reports.

Credit rating agency Fitch has stated that if the Russian state does not pay its ruble-denominated bonds within 30 days, it will declare the country insolvent.