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Russia claims to have ordered payment as it seeks to avoid historic debt default

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Russian President Vladimir Putin speaks to Anton Siluanov (Finance Minister) during the EEU Summit Meeting on December 20, 2019, in Saint Petersburg.

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Russia’s Finance Ministry stated Thursday that they had made crucial interest payments to two dollar-denominated Eurobonds. It claimed the order was given to Citibank in London.

According to the ministry, it will comment later on separately whether or not $117 million has been credited.

CNBC reached Citibank on Thursday morning and they declined to comment.

Russia will be evaluating the payment of its two eurobond coupons by September. Russia is preparing for the possibility of losing its eurobond coupons. first foreign currency debt default in over a century after the U.S. and international allies imposed a barrage of economic sanctions over its invasion of Ukraine.

They have made it impossible for Russia to access large quantities of gold and other foreign currency reserves.

Russia was allowed to pay interest of $117 million on its two sovereign eurobonds until Wednesday at midnight.

Anton Siluanov is Finance Minister saidOn Wednesday, Russia attempted to pay the money but the decision was left to the United States.

It was unclear if the payment was in dollars or rubles.

Fitch Credit Ratings Agency warned that the default would be triggered if bondholders were to pay in currency other than dollars earlier this week.

‘Russia blinked’

Timothy Ash (BlueBay Asset Management senior emerging market sovereign strategist) said that Russia had “blinked” via email.

“It paid the amount using resources it had in its small war-fibre, but not within the scope of Western sanctions.” Let’s hope it does not end up with bondholders.

Ash said that Russia realized the “price of default” was higher than it had thought.

Russia would be in technical default if it didn’t pay. However, the possibility of Russia not paying could trigger a grace period for 30 days. The Kremlin may claim that Western sanctions prevented Russia from making the payment.

If Russia fails to pay its foreign debts after the grace period has expired, it would become the country’s first sovereign default.

The payment was being made by Russia’s Ministry of Finance in the light of the sanctions imposed on Russia by the Central Bank of Russia, which rendered large amounts of the Central Bank of Russia’s foreign currency reserves unaccessible. This uncertainty led to a series of credit downgrades at the top global rating agencies.

— CNBC’s Elliot Smith contributed to this report.

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