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Russia stokes fears of first foreign currency default in more than a century

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The view from the Moscow Kremlin, and St Basil’s Cathedral.

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Russian Finance Minister Anton Siluanov stated Wednesday that it was up to the U.S. whether interest payments for two eurobonds in dollar currency are approved, fuelling fears about Moscow. first foreign currency debt defaultOver a century.

Siluanov stated that the possibility of or inability to fulfill our foreign currency obligations does not rest on us. He said this in an interview with RT Arabic. according to Russian news agency RIA.

The Russian Federation is able to make payments in ruble settlements because it has sufficient foreign currency funds.

Siluanov said Russia had sufficient funds to meet its obligations and pay $117 millions in interest on the two sovereign eurobonds that were due on Wednesday. But, it is important that the U.S. clarify whether settlements are possible. CNBC reached out to the U.S. Treasury Department Office of Foreign Assets Control for comments. This Office administers sanctions. The U.S. Treasury Department’s Office of Foreign Assets Control, which administers sanctions, was unavailable for comment immediately.

Russia may try to pay in rubles, if the settlement is in dollars.

Fitch, a credit ratings agency, has cautioned that bondholders who pay in currencies other than dollars could be subject to default.

Russia’s nonpayment could start a 30-day grace period, before it falls into technical default. But the Kremlin is likely to claim that Western sanctions prevented Russia completing the payment.

The non-payment, if confirmed after the grace period ends, would be Russia’s first sovereign failure since 1998 when it defaulted domestically and its first sovereign default in foreign currency debts since 1918, following the Bolshevik Revolution.

In light of Russian sanctions that made much of Russia’s foreign exchange reserves unavailable, economists were unsure how Russia’s Ministry of Finance would handle the payment. It led to credit downgrades at the top global rating agencies.

Russia’s Siluanov said Monday that Russia will use its reserve of Chinese yuan to make some of its payments, with euros and dollars now inaccessible due to sanctions,And also suggested that creditors from “hostile” countries may be paid in rubles.

—CNBC’s Elliot Smith contributed to this article.

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