Putin transferred the service of Russia’s foreign debt to rubles

Russian President Vladimir Putin signed a decree according to which obligations on Russian government bonds in foreign currency can be unilaterally converted into rubles. Such a decision on the part of Russia may be perceived by bondholders as a default. The decree is posted on the state portal for placing normative and legal acts.

To pay off debt obligations, Russia will create a special account for each holder of securities, to which funds in rubles equivalent to the amount of debt in foreign currency will be credited. According to the decree, ruble payments on foreign currency debt will be considered "executed properly" regardless of the position of those to whom these payments are intended, and indexation of payments will take place at the ruble exchange rate against foreign currencies in the domestic market of Russia.

“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 depositary," Putin's decree says.

After the imposition of sanctions against Russia and the ban on the use of foreign currencies, the Ministry of Finance faced problems in redeeming government bonds denominated in foreign currencies. For some time, the US Treasury allowed Russia to service its external debts from reserves, but later banned this payment channel as well. The Russian side announced that in fact the United States is pushing Russia into a technical default, despite the fact that Russia has the funds to pay off its obligations.

As a result, the authorities decided to convert the liabilities into rubles. Initially, it was assumed that the funds would be kept in the accounts of the National Settlement Depository (NSD), but after the imposition of sanctions against NSD, this option will have to be changed. The decree says that it must be submitted within 10 days from the date of publication of the decree, Russian banks will be involved in the calculations.

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