International investors are poised to default Russia within days by rejecting an offer from the Kremlin to pay its debts in rubles.
The city’s senior fund managers have said they would refuse to take Russian currency as a form of payment if offered on Wednesday to settle a $117m (£90m) interest bill. The country could offer rubles to circumvent sanctions preventing access to its dollar reserves.
Russia admitted for the first time on Monday that it was at risk of defaulting on its sovereign debt and accused the West of using sanctions to artificially create a situation where it cannot repay its creditors.
Russian Finance Minister Anton Siluanov insisted the country had enough money to service its debts.
A unilateral decision to pay the interest bill in Russian currency will trigger a default, three senior fund managers said.
Payment of the deposit must legally be made in dollars, so any attempt to use another currency may be rejected. A default would mean that Russia is effectively bankrupt and would likely trigger further capital flight.
A city investor added, “Unless you have permission from the bondholders, you cannot change the denomination currency of the bond.
“It’s very hard to believe that bondholders would agree with that.”
There is still a chance that Vladimir Putin’s regime will change course.
City sources said Monday that enough dollars are available to make that payment, although the bonds will become increasingly difficult to maintain over time.
State-owned companies paid coupons in foreign currencies instead of rubles, with Russian Railways JSC settling a 23 million euro coupon in euros last week, according to Bloomberg.
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This notice was published: 2022-03-14 19:21:06