Russia will service its external obligations in rubles if the foreign exchange accounts of the central bank and government remain blocked by Western sanctions, Finance Minister Anton Siluanov said on Thursday.
The minister said that bondholders will be able to receive their payments in dollars or euro only if a block on the central bank’s reserves held overseas is lifted.
“We will repay our external obligations in rubles, but we will carry out the conversion as our gold and foreign exchange reserves are unfrozen,” Siluanov said at a government meeting attended by President Vladimir Putin.
The asset freeze on the Central Bank of Russia was imposed as part of the economic penalties introduced against the country over the launch of a military operation in neighboring Ukraine.
Russia will make transfer orders to provide payments in hard currency in accordance with the issue documents, but if they are rejected or receive no reply from agent banks, the debt will be satisfied in rubles, according to Siluanov’s statement published by the Finance Ministry.
On Sunday, President Putin signed a decree allowing Russia and Russian companies to pay foreign creditors in rubles as a tool to avoid defaults while capital controls remain in place.
Last week, the world’s largest rating agencies downgraded Russia’s credit ratings to pre-default amid the harsh sanctions. Meanwhile, the International Monetary Fund said that a Russian debt default is no longer “improbable,” admitting that the country has money it can’t use.
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