Russia avoids default with debt payments in dollars
Russia made a number of international debt payments late Friday to avoid a default, Reuters reports.
Why it matters: It made the payments in dollars and euros, despite a decree from Russian President Vladimir Putin in early March that Russia and Russian companies would only pay foreign creditors in rubles. Moscow took the stance after Western sanctions on its foreign reserve currencies in response to Russia's invasion of Ukraine.
- By sanctioning its reserve currencies, the U.S. and its allies hope to force Russia to prioritize its foreign currencies for debt payments and not for funding its war effort in Ukraine.
Russia's Ministry of Finance in early April attempted to make the payments in rubles. Credit rating agencies said Russia would still be declared in default if it made payments in a different currency than the currency specified on the bonds.
- The country's foreign currency issuer credit ratings was altered to "selective default" by the S&P, and it was given a 30-day grace period to pay debtholders in U.S. dollars and euros.
By the numbers: Russia's Finance Ministry said it paid $564.8 million on a 2022 Eurobond and $84.4 million on a 2042 bond in dollars, according to Reuters.
- The Russian government has borrowed about $49 billion in dollar- and euro-denominated bonds.
The big picture: Russia hasn't defaulted on international debts since the Bolshevik Revolution, though it defaulted on domestic debt during a financial crash in 1998.
- The fallout of a Russian default on international debt isn't exactly clear, but it could have complex ripple effects for the country and the broader market, Axios' Kate Marino reports.