Page 131 - RusRPTJul22

8.5 Fixed income
Russian President Vladimir Putin signed a decree allowing for the repayment of Russia’s Eurobonds in rubles on June 23.
US and EU sanctions froze Russia’s international reserves of foreign currency after the start of the war, making it more difficult for Russia to service its foreign debts in the required currency.
In late May, the US Treasury refused to renew a temporary measure allowing Russia to make payments in dollars, making a Russian default inevitable.
Russian authorities have stated that they will consider obligations fulfilled if ruble payments equivalent to the amount in foreign currency are made on the Eurobonds, regardless of the position of the international community.
“Obligations under Eurobonds of the Russian Federation are recognized as duly fulfilled if they are fulfilled in rubles, in an amount equivalent to the value of obligations in foreign currency and calculated at the foreign exchange rate formed in the domestic foreign exchange market of the Russian Federation on the day when the Russian Federation made payment to the central depository," the decree says.
Finance Minister Anton Siluanov insists that Russia is not defaulting on its debt, and any accusation of such is “a farce.” The last time Russia defaulted on foreign currency debt was over a century ago.
The next Eurobonds that are only denominated in dollars are due this week. International investors will consider a payment in rubles as a default triggering the 30 day grace period to rectify the problem. Russia has no alternatives other than to pay in rubles which means the bonds will go into default at the end of July.
Russia will claim force majeure and the whole thing will go to court. One of the investors’ options is to ask the courts to seize Russian assets in Europe in lieu of the bond payments and the honey pot they can go after is the $300bn of frozen Central Bank of Russia (CBR) reserves, which have only been “frozen” and not “seized” and so technically still belong to the Russian state.
As part of international sanctions imposed in 2022, the U.S. and EU also tightened restrictions on foreign transactions in ruble-denominated
131 RUSSIA Country Report October 2020 www.intellinews.com