Russia’s closely watched dollar payments on two bonds are trickling through to investors after the country dipped into its local holdings of the U.S. currency and sidestepped its first foreign default in a century.
by the Treasury in early April. Russia tried to pay in rubles, but that was deemed a breach of contract, leading to legal threats from Moscow, warnings from ratings firms and an apparent one-way path to default.tapped its domestic dollar reserves and the money started to flow to waiting investors.
The U.S., the European Union and others are using the global banking system to cut Russia off from its money and squeeze Vladimir Putin’s resources, and that will feed into the decision about the May 25 deadline. “The fact that Russia is attempting to make the payments in U.S. dollars indicates to us that they do want to avoid a default,” Morgan Stanley’s global head of emerging-market sovereign credit strategy Simon Waever wrote in a note late Monday.The next payments are due on May 27 for bonds maturing in 2026 and 2036 — two days after the OFAC exemption is set to expire.
For the euro-denominated 2036 bond, that includes using rubles as a last resort. The dollar-denominated 2026 bond also allows for payment in euros, Swiss francs or pound sterling, as well as for interest payments in dollars to accounts outside of New York such as Switzerland, the U.K. or the European Union.
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