Finance minister threatens legal action if Russia forced to default on foreign debts

Russian Finance Minister Anton Siluanov Monday, in a statement to the pro-Kremlin newspaper Izvestia, threatened to take legal action if the West tried to force Russia to default on its sovereign debts.

Since Russia invaded Ukraine on February 24, Western countries have imposed heavy economic sanctions on Russia. As a result, more than $300 billion, or approximately half, of Russia’s international reserves are blocked. The rouble has also varied significantly in value since the invasion of Ukraine, with the current exchange rate at $1 for every 80.2500 roubles.

Russia is facing its first sovereign default on international bonds in more than a century. A portion of that repayment, $649 million, was due to two holders of foreign bonds on April 4. However, the US Treasury Department blocked the transfer of Russian funds because of the economic sanctions imposed by the US on Russia. Thanks to a built-in grace period, Russia has until May 5 to avoid any defaults on the bonds. Russia attempted to negotiate with the bondholders to repay the debts in roubles, despite the debts being due in US dollars.

Siluanov said in an interview with Izvestia that Russia was prepared to sue and take all of the necessary steps to ensure repayment of the debts. Siluanov said, “We will present in court our bills confirming our efforts to pay both in foreign currency and in roubles. It will not be an easy process. We will have to very actively prove our case, despite all the difficulties.”

Siluanov said to Izvestia that Russia would appeal to international courts but made no further comment regarding what specific legal actions Russia was prepared to take.