Russia Walking Through a Minefield Amid 'National Default Crisis'

Russian Speaker of the House: "We Will Repay in Rubles... Funds Are Sufficient"

Russian Ruble.
Photo by Yonhap News

[Asia Economy Reporter Na Ye-eun] Russia, which was on the brink of default due to economic sanctions from the West and the United States, has succeeded in putting out the urgent fire, but it is reported that it must repay $100 million (about 126.5 billion KRW) in foreign debt by the 27th.

According to foreign media including The Wall Street Journal (WSJ), on the 24th (local time), the U.S. Treasury Department announced on its website that the Office of Foreign Assets Control (OFAC) under the Treasury Department will end the exemption measures applied to Russia at 00:01 on the 25th (Korean time 13:01 on the 25th). The U.S. did not extend the measure that allowed principal and interest payments on Russian government bonds.

As a result, Russia is in a situation where it must repay $71.25 million in interest on dollar-denominated bonds maturing in 2026 and €26.5 million in interest on euro-denominated bonds maturing in 2036 by the 27th.

The Russian Ministry of Finance announced on the 20th that it had already transferred the interest payments to the National Settlement Depository (NSD) of the Russian Federation. According to The New York Times (NYT), even if the NSD cannot pay the interest to bondholders in foreign currency due to Western sanctions, both bonds include a clause that allows payment in another currency if payment in the agreed currency is difficult due to reasons beyond Russia's control. The grace period for payment on both bonds is 30 days.

Anton Siluanov, Russian Minister of Finance, stated on the 18th, "Russia has no plans to declare default," adding, "Even if Western institutions (debt repayment intermediaries) are closed, payment can be made in rubles."

According to JP Morgan, Russia must repay $235 million by the 23rd of next month and repay $159 million the following day. The grace period for the bonds due on the 23rd is 30 days, and if Russia fails to repay on the 24th, it will receive a 15-day grace period.

Meanwhile, on the 25th (local time), Alexei Kudrin, former Russian Minister of Finance and Chairman of the Accounts Chamber, told reporters, "Russia has all the resources to repay national debt."

Also on the same day, Vyacheslav Volodin, Chairman of the Russian Duma (Lower House), said via Telegram, "We have all the funds necessary for payment" and "We will pay in rubles."

He claimed, "This situation was caused by the U.S. blocking dollar payments," adding, "Currently, the ruble is quite strong, and market conditions are favorable to us (Russia)." He also stated that gas export contracts abroad are being settled in Russian rubles and emphasized, "Western countries, including the U.S., will have to get used to the ruble."