Russia May Have Made Payment To Avoid Default

Russia says it has ordered the $117 million in Interest Payments, it owes Wednesday, to be sent to Investors, attempting to Avoid its First International Default, in more than a Century. But it's Not out of the woods yet. That's because the Funds used to make the Debt Payments came from Russia's Frozen Foreign Assets, Sanctioned because of its Attack on Ukraine, so it remains unclear whether Investors will receive their Money.

Anton Siluanov, Russia's Finance Minister, said that the Country had made good on its Obligations to Creditors. But the "possibility or impossibility of fulfilling our obligations in foreign currency does not depend on us," Siluanov said, warning that the Payment might Not go through if the U.S. Disallows it. "We have the money, we made the payment, now the ball is in America's court," he said.

The Two Coupons Russia must Pay, on the Maturing Dollar-denominated Eurobonds, serve as the First Test of Russia's Ability to Pay its Debts while the World puts Massive Sanctions on its Economy. If the U.S. Blocks the Payment, Russia could try to pay in Rubles. But that action could constitute a Default.

Russia has the Money to pay its Debts, it just can't Access about half of those Funds, after the West placed Sanctions on its Foreign Reserves, totaling about $315 billion.

So the Order to pay its Debt in dollars could be a Symbolic gesture, that it wishes to pay back its Creditors with the Currency they used to Lend to Russia.

If the Russian Government Defaults, Investors' Losses could start to mount.

Western Investors are Less exposed to Russia than they used to be. Sanctions following the Annexation of Crimea in 2014, already encouraged those Investors to Reduce their Exposure.

But International Banks are owed about $121 billion by Russian Entities, according to the Bank for International Settlements.

JPMorgan estimates that Russia had about $40 billion of Foreign Currency Debt at the end of last year, with about Half of that held by Foreign Investors.

More Payments are coming due soon. A much larger $2 billion Payment, scheduled for early April, could create even bigger Headaches for Moscow.










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