China News Service, June 24 (Reporter Meng Xiangjun) A few days ago, Russian President Vladimir Putin signed a presidential decree establishing a temporary procedure for paying government debts in foreign currencies. This move is considered to be the latest move to avoid sanctions from the United States and the West.

　　Western countries are doing everything possible to prompt Russia to default on its debt.

On June 23, the Russian Ministry of Finance officially announced that it would pay a batch of Eurobond coupons in rubles.

　　Will Putin's move work?

On June 17, local time, Russian President Vladimir Putin delivered a speech at the plenary session of the 25th St. Petersburg International Economic Forum.

Photo courtesy of St. Petersburg International Economic Forum

[Putin signs the order, the ruble goes out again]

　　According to the presidential decree signed by Putin, paying Eurobonds in rubles will be regarded by Russia as fulfilling its debt repayment obligations.

The amount paid in rubles shall be equivalent to the value of the debt in foreign currency and calculated at the exchange rate on the date of payment.

　　The document stipulates that in the absence of a representative of the foreign custodian institution, the Russian side will open an I-type ruble account in the name of the aforementioned institution. This type of account can be opened in the name of multiple institutions, and the beneficiary is the Russian euro debt holder.

　　According to the Russian side, the Russian Ministry of Finance has the right to sign agreements with central custodian agencies, Russian banks and other individuals.

The central depository will register the holders of Russian Eurobonds, and the entrusted banks will pay them according to the time limit specified in the bond issuance prospectus.

After paying the ruble at the exchange rate on the settlement date, the Russian side will consider the debt to be settled.

Data map: On March 1, in the business hall of a local bank in Moscow, customers were waiting for business.

Photo by China News Agency reporter Tian Bing

　　This trick is actually the reverse version of the "Ruble Settlement Order". The inspiration comes from the previous settlement method of natural gas trade.

In Putin's eyes, gas buyers who are "unfriendly" to me must use rubles to buy gas, and now they must use rubles to pay off the debts of these countries.

　　Moreover, if you don't answer or send someone to come, we will never break the bill, we will open an account for you and transfer the money, which is "two clearing".

Of course, with my money.

[The United States does not exempt, Russia warns]

　　"The West has banned its own banks from allowing payments from Russia".

Before the presidential decree came out, Russian Finance Minister Siluanov asked: "When have you seen a ban on domestic investors from accepting repayment from borrowers?"

　　The primary troublemaker is the United States.

　　Previously, the U.S. Treasury Department allowed U.S. individuals and legal entities to accept interest, dividends or due payments on debt or equity paid by the Bank of Russia, the National Welfare Fund and the Treasury Department, but the relevant license expired on May 25, 2022.

U.S. Treasury Secretary Yellen.

　　After expiration, U.S. individuals and legal entities need special permission to continue receiving such payments from Russia.

　　Just one day before the expiration, the U.S. Treasury Department announced targeted measures-the Russian government’s debt service waiver through the above-mentioned channels will not be extended.

　　From the statement of the Russian Ministry of Finance, everything has been expected.

It pointed out that "as a responsible borrower", the Russian side reiterated its willingness to continue to repay all debts, but "it cannot continue to repay in US dollars and will be repaid in the currency of the Russian Federation."

The Russian Foreign Ministry warned that the US government's decision violated the rights of foreign investors and weakened trust in Western financial infrastructure.

Russian President's Press Secretary Peskov.

　　Russian President's Press Secretary Peskov pointed out that Russia does not actually have conditions for breach of contract, unless these conditions are "artificially created and blamed on us."

　　Former Russian President Dmitry Medvedev also criticized that this is "a political breach, not a financial breach," and that the United States' behavior of creating technical obstacles "should be judged by the court as force majeure or creditor fault."

　　Medvedev also ridiculed that U.S. bondholders themselves can’t get Russian money, and “this is what Biden calls a powerful move to strengthen trust in the financial system in the context of inflation and energy crises.”

【Dodge a wave, come another wave】

　　After the West kicked Russia out of the SWIFT system and froze the foreign exchange accounts of the Russian government and the central bank, nearly half of Russia's more than $590 billion foreign exchange reserves were useless.

As early as early March, Putin signed a ruble to repay the external debts of Russia, its federal subjects, cities, and the Russian president.

File:Ruble banknotes.

　　At that time, two European bond coupons with a total amount of 117.2 million US dollars expired, which was regarded as the first signal that Russia might constitute a default. However, Russia finally paid in foreign currency (US dollars) and announced that there was no problem with the repayment of the national debt.

According to statistics, Russia has successfully repaid 7 euro bonds through various means, temporarily avoiding debt default.

　　However, Western media frequently asserted that Russia would “face its first major foreign debt default in more than a century”.

On one occasion, the Russian Ministry of Finance “angry” at CNN, saying that its reports were untrue, and that all this was caused by the “illegal actions” of the U.S. authorities, which prevented bondholders from being able to pay in U.S. dollars.

　　Obviously, the United States is determined to block Russia.

Bloomberg reported on June 13 that two U.S. banks, JPMorgan Chase and Goldman Sachs, have suspended their Russian debt repayment business.

Credit rating agency Standard & Poor's: Russia defaults on foreign debt.

Image source: Screenshot of CNN report

　　According to statistics, Russia needs to pay three interest payments totaling nearly $400 million on June 23 and 24, as well as the interest that has not been paid since late May before the deadline on the 26th.

　　International public opinion believes that Russia may "unable to successfully repay" these interests, which will actually "constitute a breach of contract".

　　However, on the 23rd, the Russian Ministry of Finance said that it had transferred 12.51 billion rubles to the Russian National Settlement Depository (NSD) to pay the coupons of European bonds due in 2027 and 2047. The Russian side believes that the obligation to pay interest "Fully Fulfilled".

　　The Russian Ministry of Finance emphasized that if the West seized Russian assets as an excuse for Russia's "default" simply by changing the currency of payment, then Moscow would regard this as a move to "break diplomatic relations".

["Most European users switch to rubles"]

　　Let's go back and look at the situation of the natural gas "ruble settlement order".

Putin previously announced that starting from April 1, if the EU and other countries that sanction Russia do not use the ruble to settle natural gas, Russia will regard it as failing to fulfill its natural gas contract obligations and implement a "gas cutoff".

Data map: Employees of a natural gas transportation company in Hungary check the pressure of natural gas pipelines.

　　According to Grishunin, head of the rating service department of the Russian national rating agency, there are two ways for European companies to buy rubles to pay for natural gas imported from Russia:

　　First, open ruble and EUR/USD accounts for purchases through unsanctioned Russian banks or banks not included in the U.S. Treasury SDN list.

　　Second, European consumers open subsidiaries in Russia, deposit EUR/USD into their accounts, and the subsidiary sells the currency on the Moscow Exchange and buys it with the funds that go into the ruble account.

　　At the St. Petersburg International Economic Forum held recently, Russian Deputy Prime Minister Novak revealed that "most European customers" of Gazprom have turned to paying for natural gas in rubles, accounting for about 90% to 95% of the supply.

Data map: The pipeline of the landing facility of the frozen Russian natural gas pipeline project "North Stream-2".

　　Although Western sanctions have indeed hindered the flow of Russian funds, through energy channels, Russia has actually obtained a huge flow of funds in the billions of dollars per week.

　　It can be said that Putin is "trooping the water to cover up the soil". No matter how the United States and the West restrict me, I will block it with my backhand and try not to disappoint bondholders.

As long as Russia does not default on its debts, it is believed that more and more people will use the ruble.

　　However, at present, the West is determined to weaken Russia's credibility in the international financial market, and this defense war will continue with difficulty.

(Finish)