Russia appeared to narrowly avoid default on Friday as it paid off a number of overdue international debts in dollars, reversing its recent policy requiring transactions occur in rubles.
The finance ministry said it paid $564.8 million on a 2022 Eurobond and $84.4 million on a 2042 bond in dollars, as specified on the bonds, Reuters reported.
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Russia has repeatedly faced the threat of default since the West announced crippling sanctions that Moscow and bank officials managed to combat through a number of strict and extreme measures, including capital controls and suspending trading on the Moscow exchange for almost a month.
Officials remained keen to avoid the country’s first default since a financial crash in 1998.
Russia attempted to pay for the bonds using rubles at the start of April, but banking and credit institutions did not expect the transaction to process due to legal requirements tied to the type of currency used. Russian President Vladimir Putin had mandated that all payments for Russian energy would need to be in rubles, going so far as to cut off Poland and Bulgaria for their refusal to comply.
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Standards & Poor (S&P) downgraded Russia’s foreign currency rating over fears it would not complete the payment in time despite a 30-day grace period.
Bank of Russia Chief Elvira Nabiullina cautioned that the country has yet to feel the full impact of sanctions after Russia appeared to stabilize its economic free fall.
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“The sanctions have affected the financial market, but now they will start to impact the real economy, increasingly more significantly,” she said last week.
Anthony Kim, a research fellow in economic freedom at the Heritage Foundation, previously told FOX Business that Russia’s economic recovery is an “ongoing process” that will continue to grow more severe the longer the Ukraine invasion drags on.
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“There was an immediate shock or reaction from the Russian market and the markets outside Russia, which is why we saw this immediate legitimate panic and legitimate downturn,” Kim explained. “And where we are now is a different kind of period.”