Russia has three weeks to pay debts in dollars and avoid default

by time news

With the US Department no longer accepting dollars held by Moscow in US banks, Russia is again at risk of default.

The “investors” arm of the Moody’s agency confirmed on Thursday that Russia “could be considered in default of payment » if it does not pay two installments in dollars by the end of the grace period, next May 4.

For several weeks, Russia managed to avert the danger of a default despite the sanctions imposed against it because the American Treasury allowed the use of foreign currencies held by Moscow abroad to settle foreign debts. But the US ministry has tightened the sanctions, no longer accepting dollars held by Moscow in US banks. The Russian Ministry of Finance announced at the beginning of April that it had settled in rubles a debt of nearly 650 million dollars.

Moody’s said in a statement that the April 4 payment of two bonds maturing in 2022 and 2042, in rubles rather than US dollars, “modifies the terms of payment compared to the initial contracts and can therefore be considered as a default” if Moscow does not discharge this debt by May 4, that is to say the end of the grace period. “The bond contracts do not provide for any reimbursement in a currency other than the dollar”, continues Moody’s. “Although Eurobonds issued after 2018 allow under certain conditions to make repayments in rubles, those issued before 2018 (including the 2022 and 2042 bonds) either do not contain this alternative currency clause, or only allow repayment in other hard currencies (dollar, euro, pound sterling or Swiss franc)’details the agency.

Russia’s rating already downgraded

On April 9, the financial rating agency S&P Global Ratings had already announced that it had lowered Russia’s rating for its payments in foreign currencies to the level of “selective payment default”, precisely because Moscow had settled in rubles the debt evoked by Moody’s.

A country is considered in default of payment when it is unable to honor its financial commitments to its creditors, which may be States, financial institutions (International Monetary Fund, World Bank, etc.) or investors in the financial markets. . The default is qualified as partial when the State does not reimburse part of its obligations.

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