Russia Accuses West of Seeking 'Artificial Default' Through Sanctions Over Ukraine

Russia’s finance ministry on Monday accused foreign countries of wanting to force Russia into an “artificial default” through unprecedented sanctions over Ukraine and said it would meet its debt obligations. As Russia is due to make an interest payment on its external debt later this week, Moscow warned that 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, including its eurobond issued since 2018.

Russia is due to make a combined $117 million in interest payments on two dollar-denominated bonds on Wednesday, although it has an automatic 30-day grace period. International Monetary Fund chief Kristalina Georgieva said Sunday that the while Russia has money to pay its debt, it “cannot access it”.

“I can say that no longer we think of Russian default as an improbable event,” Georgieva told the CBS show Face the Nation.

Sanctions on Moscow over its “special military operation” in Ukraine delivered an unprecedented blow to Russia’s banking and financial system, with a large part of its foreign currency reserves frozen. It has also raised the possibility of Russia defaulting on its external debt for the first time since the financial crisis of 1998.

Russia has boosted efforts to prevent money from leaving its borders and to support the ruble, which has already seen a precipitous drop in value against the dollar. Amid piling sanctions, a flurry of Western companies — from H&M to Ikea — have suspended their business operations in Russia. There are growing fears Russian authorities may try to “nationalise” or seize the assets of the local subsidiaries.

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