Russia: Putin decree on payment of foreign bonds in rubles

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Russian President Vladimir Putin today signed a decree on foreign bond payment procedures, as investors closely monitor the possibility of a possible default on foreign debt.

The Kremlin has said there is no reason for Russia to default on its debt. Moscow says it has the funds, but is struggling to pay interest to bondholders because of Western sanctions, and accuses the West of trying to drive Russia into artificial bankruptcy.

Putin had given the government 10 days to select the banks that would process the Eurobond payments as part of a new plan, which suggests that Russia will consider that its debt obligations will be met when it pays the bondholders in rubles.

Failure to service foreign debt due to Western sanctions imposed on what Russia calls a “special military operation” in Ukraine has pushed it closer to its first failure to pay international bonds since the Bolshevik revolution a year ago. and more century.

The decree states that “obligations in Eurobonds of the Russian Federation will be deemed to be properly fulfilled if they are executed in rubles in an amount equivalent to the value of the obligations in foreign currency.”

According to the decree, the exchange rate will be based on the exchange rate that exists in the Russian foreign exchange market on the day of payment.

Bankruptcy could occur in late June. Russia was due to pay $ 71.25 million and $ 26.5 million in interest-free bonds on May 27.

Russia has said it has transferred cash to the National Settlement Depository, but sanctions may have prevented further development. To avoid defaults, the money must end up in the bondholders’ accounts within a 30-day grace period.

The finance ministry announced last week that Russia would pay in rubles for its Eurobonds, which could later be converted into foreign currency.

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