US mulls letting Russia continue to repay dollar debt

The United States is considering whether to let expire or extend a sanctions waiver that allows Russia to continue to repay its debt and thus escape default, Treasury Secretary Janet Yellen said on Tuesday.

It is “something we are actively looking at right now. We want to make sure we understand what the consequences and potential fallout of license expiration would be“, she said. This exemption, taken at the end of February, allows Russia, despite US Treasury sanctions, to continue to repay its debt in dollars held in Russia. But it expires on May 25, two days before the next deadline. On the other hand, Russia can no longer repay its debt with dollars held in American banks, within the framework of the reinforced sanctions imposed by Washington on April 5. Moscow then tried to settle a debt in dollars in rubles.

A gross external debt which represents 20% of the total Russian debt

We haven’t made a decision yet“, but it will take place “rapidly“, added the Minister of Economy and Finance of Joe Biden, during a hearing in the Senate. “We are actively participating in an assessment of the risks and impact of not renewing the exemption“, she further underlined. The next deadline, May 27, is for 100 million euros in interest for two bonds: one requires payment only in dollars, euros, pounds or Swiss francs; the other can optionally be paid in rubles. The Russian government will then have to face another twelve deadlines in 2022.

The Governor of the Russian Central Bank Elvira Nabioullina had assured on April 29 that we “can’t talk about fault“, while acknowledging that Moscow faces “payment difficulties“. The foreign debt of Russia represents, according to its Ministry of Finance, approximately 4,500 to 4,700 billion rubles (about fifty billion euros at the current rate), or 20% of the total public debt. Russia missed payments on domestic debts in rubles during the 1998 financial crisis, but has not defaulted on its foreign debt since 1918 when Bolshevik leader Vladimir Lenin refused to recognize the debt inherited from the toppled tsarist regime. during the revolution of 1917.

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