Russia says West trying to push it into default

MOSCOW: Russia accused the West of seeking to push it into an “artificial default” through unprecedented sanctions over Ukraine, but vowed to meet its debt payments.

Russia is due to make an interest payment on its external debt later this week and Moscow warned it will be doing so in rubles if sanctions prevent it from using the currency of issue.

“The freezing of foreign currency accounts of the Bank of Russia and of the Russian government can be regarded as the desire of a number of foreign countries to organise an artificial default that has no real economic grounds,” Finance Minister Anton Siluanov said in a statement.

Ratings agency Fitch last week downgraded Russia s sovereign debt rating deeper into junk territory, warning that the decision reflects the view that a default is “imminent”.

But Siluanov denied that Russia “cannot fulfil the obligations” of its government debt.

He said Russia “is ready to make payments in rubles” according to the exchange rate of Russia’s central bank on the day of the payment.

While Russia’s foreign currency government bonds issued since 2018 do contain provisions for repayment in rubles, that is not the case for the combined $117 million in interest payments on two dollar-denominated bonds on Wednesday.

Read more: Russia says half of its reserves are frozen

Russia tumbled into default in 1998 when, thanks to a drop in the prices of oil and other commodities, it faced a financial squeeze that meant it could no longer prop up the ruble and pay off its debts which had swelled due to the first war in Chechnya.

The plunge in the value of the currency, a spike in inflation and bank collapses caused widespread misery and were seen as helping President Vladimir Putin s rise to power.

Putin had worked on improving Russia’s finances by keeping debt low and using windfall oil export revenue to amass $600 billion foreign currency reserves.

But sanctions on Moscow over invasion of Ukraine targeted $300 billion of Russia s foreign currency reserves held abroad.