[[Invasion of Ukraine] Interest paid, delivered to Citibank, a payment agent through JP Morgan]
Citizens pass in front of an exchange office in Moscow, the capital of Russia, on the 5th. / Photo = AFP It is reported that some creditors have received interest on government bonds paid in dollars by Russia, which is facing a crisis of national bankruptcy due to economic sanctions from the West.
Citing a source on the 17th, Reuters reported that JP Morgan, a Russian currency trading bank, processed cash sent by the Russian government to pay interest on government bonds and deposited it into Citigroup, a payment agent. Citigroup checks the funds and distributes them to creditors.
Russias Ministry of Finance announced on the previous day that it had paid 117 million dollars in interest on two dollar-denominated government bonds that had matured. However, it was unclear whether the payment was properly approved due to Western sanctions. In response, Russian Finance Minister Anton Siluanov showed that if the interest paid was not passed on to creditors, it would be due to Western sanctions, and “the ball was passed on to the US authorities.”
“Interest was paid in dollars unexpectedly,” one creditor told Reuters. An official from the financial sector also said that customers holding Russian government bonds received interest.
Although some creditors have not yet received interest on government bonds, they are optimistic that they will be able to collect interest on government bonds as well, given that they have received interest on dollar-denominated corporate bonds from state-owned and private Russian companies.
The United States announced at the end of last month that it would ban all financial transactions between its financial institutions and the Russian central bank and the Ministry of Finance, but it does allow financial transactions for debt repayment with exceptions. According to the U.S. Department of the Treasurys Office of Foreign Assets Control, the exception is in effect until May 25.
Russia has announced that it will repay the debt in rubles rather than dollars ahead of the maturity date of interest payments on government bonds. Since the sanctions caused the default, they were going to pay it back with the ruble, which was useless due to the collapse in value. Based on the exchange rate of Hana Bank, 1 ruble is equivalent to only 0.01 USD. The problem was that there was no option to pay the interest on these government bonds in rubles. International credit rating agency Standard & Poors has noted that repaying debts in a currency other than the one agreed upon would be considered a default.
