The United States has decided to end an exemption allowing Moscow to pay its debts in dollars, the United States Treasury announced on Tuesday, a decision that could precipitate Russia into default.
• Read also: [LIVE] Three months of war in Ukraine: here are all the latest developments
This measure will take effect two days before the next payment deadline for Moscow, which concerns just over $ 100 million in interest on two bonds.
According to the Wall Street Journal citing the official Russian news agency Tass, the authorities have already paid this interest.
Besides the May 27 deadline, the Russian government still has to honor 12 payments by the end of the year. Failure to pay therefore seems inevitable.
In place since the start of Western sanctions against Russia, in retaliation for the invasion of Ukraine launched on February 24, this exemption had until then allowed Moscow to escape them.
Washington had agreed to a temporary exemption to “allow an orderly transition and allow investors to sell their securities,” said US Treasury Secretary Janet Yellen last week.
Towards a legal battle?
US President Joe Biden’s Minister of Finance then indicated that this exemption would “probably” end on Wednesday.
Since the beginning of April, Russia could no longer repay its debt with dollars held in American banks.
The Governor of the Russian Central Bank, Elvira Nabioullina, admitted at the end of April April that Moscow was facing “difficulties in payments”, but she refused to speak of default.
Russia’s foreign debt represents, according to its Ministry of Finance, approximately 4,500 to 4,700 billion rubles (about fifty billion euros at the current rate), or 20% of the total public debt.
Russia missed payments on domestic debts in rubles during the 1998 financial crisis, but has not defaulted on its foreign debt since 1918, when Bolshevik leader Vladimir Lenin refused to recognize the debt inherited from the tsarist regime. overthrown in the 1917 revolution.
In the event of default, the Russian government would lose access to an important source of financing or be forced to pay prohibitive interest rates even if in fact it can no longer raise funds because of Western sanctions.
For their part, holders of unpaid debts risk losing all or part of their money.
There could also be a legal battle since Russian Finance Minister Anton Silouanov had indicated in April that Russia would initiate proceedings if it was declared in default by the West.
He then accused Western countries of “artificially” creating the conditions for a default.
Like all states, Russia borrows money in the form of bonds, often in dollars, and must regularly pay interest and repay capital.
A country is considered in default when it is unable to honor its commitments to its creditors.
