Sanctions could force Russia to repay debt in rubles

The country is due to make a combined $117m (£89.6m) in interest payments on two dollar-denominated bonds.

Russia’s finance ministry confirmed a temporary procedure for repayment of foreign currency debt was in place, but warned payments would be made in rubles if debts could not be honoured in the currency of issue due to bank sanctions.

Anton Siluanov, finance minister, insisted Russa has “the necessary funds to service our obligations”, although sanctions mean the country is unable to access $300bn (£229.8bn) of its $640bn (£490bn) in gold and foreign exchange reserves.

He further suggested Western powers have attempted to co-ordinate debt repayment difficulty for Russia: “The freezing of the central bank and government’s foreign currency accounts can be seen as a desire from several Western countries to organise an artificial default”.

Paying Eurobond repayments in rubles could be seen as tantamount to a default.

It would be “absolutely fair” for Russia to make sovereign debt payments in rubles until its foreign exchange reserves were unfrozen, Kristalina Georgieva, managing director of the International Monetary Fund, said.

She also commented that a Russian default is no longer “an improbable event” because “Russia has the money to service its debt, but cannot access it”.

She stopped short of predicting a financial crisis should Russia fail to repay but expressed concern about the “consequences that go beyond Ukraine and Russia”.

She highlighted commodity prices, energy, grains, fertilisers, metals and “the impact [a ruptured supply chain] has on inflation and in countries where inflation has already been high, this is dramatic”.