take it or leave it For the first time, the Russian Ministry of Finance has settled a debt in rubles instead of the originally agreed currencies and transferred it to a financial institution subject to sanctions for the offensive against Ukraine. If your creditors want to get the money back, they need to open an account there and also refrain from future litigation. “The obligations of the government of the Russian Federation have been fully fulfilled by the Ministry of Finance,” the agency said in a statement. Specifically, Moscow transferred 12,510 million rubles, about 223 million euros, to Russia’s National Settlement Deposit, an intermediary entity that was sanctioned by the European Union in early June, preventing it from operating with those sums with European banks. Specifically, Moscow is considering paying off two separate tranches of bonds maturing in 2027 and 2047.
Payment assumes that an exchange rate of one euro for 56 rubles has been established. The official scales have a trick: the restrictions on capital movements imposed by the authorities, the sanctions and the collapse in imports with the consequent collapse in foreign exchange demand have made it difficult to get euros and dollars in Russia .head. For example, it is forbidden to withdraw euros received after March 9th from the bank.
It is the first time that the mechanism to switch debt payments to rubles, approved by President Vladimir Putin on June 22, will come into force. The document considers any dispute settled “when an amount equal to the value of foreign currency liabilities is paid in rubles.”
“This is not a suspension of payments,” Economy Minister Antón Siluanov said. According to the Interfax news agency, the senior official has blamed this “force majeure” measure on the West and restrictions on Russian banks as punishment for the February 24 attack. “Our foreign colleagues are refusing to pay in foreign currency, which is a force majeure event for us. That is why we are switching to payments in rubles,” the minister added.
Russia denies suspension of payments
Siluanov condemned that Russia could not use the $630,000 million it had in foreign exchange and other funds abroad before the offensive because they were frozen. “Creating these artificial barriers to paying off Russia’s external debt was necessary to hang the label Originally (Suspension of payments). You can say anything and try to put that label, but those who get it know that it isn’t Originally“, he added.
The aim is to “protect” the creditors, the minister explained. There three different groups are formed; two of them have in common that they operate with Russian custodians and a third are debtors who are unable to make collections due to the huge restrictions imposed on Russian banks. The latter must open a special account “and submit a written waiver of all possible future claims together with the package of documents”. These special accounts may only be opened in the Russian National Settlement Depository, where the face value of the Eurobonds is pegged to the ruble price on the Russian stock exchange at the time of settlement.
This financial institution was sanctioned by Brussels on June 3 along with 17 entities and 65 other individuals for aggression against Ukraine, including several soldiers allegedly involved in the Bucha massacre. “Today we add to this list those responsible for allowing this unjust war and the crimes committed in Bucha and Mariúpol,” said Josep Borrell, the European Union’s High Representative for Foreign Affairs and Security Policy, in a statement released by the European Commission Explanation .
Rejection from some EU countries
The National Settlement Deposit was appointed on June 2 to replace Citibank when it comes to arranging the payment of Eurobonds. The US unit had been given a special license to carry out these works in the first months of the conflict, but the margin Washington had given the Kremlin to avoid them Originally It expired at the end of May. However, the Russian agency was sanctioned a day later and ceased operations in euros.
However, their troubles dated back to March, a few days after the bombing of Ukraine began. All of the custodian’s transactions with foreigners were paralyzed on the European platforms Euroclear and Clearstream, which no longer accepted the ruble as a settlement currency, and its membership in the European Association of Securities Depositories was suspended.
“The old trust in the Western financial infrastructure no longer exists,” said Siluanov, repeating a Kremlin mantra of the past few months: the rest of the world’s distrust in the dollar and euro will lose them as reference currencies. Last week, at the International Economic Forum in St. Petersburg, the Russian President said he forecast both currencies to decline soon.
The mechanism for paying Eurobonds is similar to what Putin decreed for Europe for gas. Gazprom’s banking subsidiary, Gazprombank, opens accounts for foreign gas companies to deposit in euros or dollars, and the company exchanges them for rubles before transferring the money to its parent company. However, countries such as Poland, Bulgaria and Finland have refused to comply with this measure, believing it would leave them in limbo in the face of future litigation.