A sanctions exemption that allows Russia to pay debts denominated in dollars ends next week. But even after that, billions in payments are due. If the deadline is not extended, Moscow faces insolvency - the first since the 1917 revolution.
If necessary, Russia wants to pay off its foreign debt in rubles in the event of a US blockade. "We will not declare default, we have money - unless Western countries make it impossible to service our debt," Finance Minister Anton Siluanov said at a forum. "We will be able to pay." As a last resort, foreigners would be paid in rubles should the Western financial infrastructure "be closed to us."
Siluanov's comments come in response to plans by the US government to block Russia's ability to pay its US creditors over the war in Ukraine. In addition, an exception that is currently still in force is to expire on May 25, a US government official said. So far, this has allowed Moscow to continue paying its American creditors despite the sanctions imposed because of the war in Ukraine.
After this date, Russia still has to transfer almost two billion dollars abroad by the end of the year. Failure to do so would bring Russia closer to a default -- the first since the 1917 Russian Revolution, when the Bolsheviks refused to recognize Tsarist-era debts.
Western sanctions against Russia actually prohibit transactions with the Russian Treasury, the central bank or the national wealth fund. But the US waiver, issued March 2 by the Treasury Department's Office of Foreign Assets Control, provides an exception -- for "receipt of interest, dividends, or principal payments in connection with debt or equity." So far, this passage has allowed the leadership in Moscow to continue to serve investors and avert a default.
In total, Russia has 15 outstanding international bonds with a face value of around $40 billion. While sanctions currently prevent Russia from accessing international bond markets to borrow fresh money, a default would potentially prevent the country from accessing these markets for many years - until creditors are fully satisfied and everyone is out of default resulting legal disputes have been settled. Experts say it can take a long time.