Russia continues to move towards a state of insolvency on its external debt following the sanctions imposed on it due to the invasion of Ukraine, which prevent it from accessing foreign currency.
According to Russian Finance Minister Anton Silwanov, Russia is working on a mechanism that will allow the payment of its bonds in a manner similar to that built for payment on Russian gas in rubles.
Since Russia blocked access to its dollar-denominated foreign exchange reserves, Russia has been able to pay its debt because of the U.S. Treasury Department’s extraordinary authorization for foreign lenders to pay off the debt. Last week, the United States announced that it would no longer allow the policy to deviate.
According to the Russian Finance Minister, the new plan will allow bondholders to open bank accounts with Russian banks that will allow the use of rubles and foreign currencies in order to receive the payments.
“This is how it works in the case of gas payments. We get this currency and then we convert it into rubles for the buyer. The mechanism for paying the Eurobond will work in the same way, only in the opposite direction.” According to him, the mechanism will allow Russia to bypass the Western payment system with the help of the Russian one. Silwanov added in a recent interview that the government is still working on the plan and when it is finished it will be presented to investors.
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