Russia is said to have paid $650 million in debt payments due since early April ahead of the weekend, avoiding the country's first default since the October 1917 Revolution.

As the Russian Ministry of Finance announced, the payments were made in the American currency in which the two bonds were issued.

They were transferred to the correspondent bank, the London branch of the US bank Citi.

Markus Fruehauf

Editor in Business.

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If Russia had instead serviced the debt in rubles, the rating agencies such as S&P Global or Moody's would have had to rate this as a default.

Because servicing the bonds in American currency is specified in the stock exchange prospectus.

Payments were due from April 4th.

After the due date, the rating agencies give the debtor a grace period of 30 days before the default is considered a default.

Russia had to repay $564.8 million on a maturing bond totaling $2 billion.

The Kremlin is said to have repaid almost three quarters of the outstanding volume of this bond in rubles.

This was possible because most of the creditors of this debt are from Russia.

Moscow also had to pay $84.4 million in interest on a bond that runs until 2042.

Foreign exchange reserves are depleted

The payments may have been made from Russia's foreign exchange reserves, as the US government pointed out that no funds had been released from the frozen foreign assets of the Russian state and its central bank.

It is in Washington's interest that Russia must draw on its domestic foreign exchange reserves to make these payments, as doing so will weaken the country's ability to fund its invasion of Ukraine.

According to the Central Bank of Russia, foreign exchange reserves amounted to $606 billion at the end of March.

They have fallen by more than $30 billion since the neighboring country was invaded on February 24.

In addition, Russia no longer has access to around $300 billion due to Western sanctions, which also affect the central bank's foreign exchange and gold reserves abroad.

$2 billion in payments pending

The US Treasury Department increased the pressure on Russia in early April when it removed an exemption that would allow American banks such as JP Morgan to pass on payments from the Russian government to Western creditors based on the balances held at American institutions.

Now the Kremlin has to fall back on the foreign exchange reserves in Russia, which means that the reserves will melt more quickly.

By the end of the year, Russia has yet to pay $2 billion in interest and principal on its dollar- or euro-denominated bonds, which have a total outstanding volume of $49 billion.