The decision to pay in Russian currency comes after the US Treasury Department prevented US banks from handling payments in dollars from Russia, stopping $ 649 million in interest and capital expiring on Monday. JPMorgan, the so-called correspondent bank responsible for handling the transaction, refused to process the cash after seeking guidance from US authorities, according to a person familiar with the matter. “Because of the hostile actions of the US Treasury Department. . . “The Russian Ministry of Finance was forced to involve a Russian financial institution to make the necessary payments,” the ministry said in a statement on Wednesday. Instead, payments will be made to ruble accounts in Russia and revenues could be converted into dollars after “the restoration of the Russian Federation’s access to foreign currency accounts,” he added. The move reiterates a previous threat by Russia to make debt payments in rubles if Western sanctions prevented it from taking dollars from bondholders. Foreign investors generally view such a move as bankruptcy, which would be Moscow’s first since the Russian debt crisis in 1998. Fitch said last month that an attempt to make dollar-denominated interest payments in Russian currency would show ” that a bankruptcy or has started a process that looks like a default “. However, Kremlin spokesman Dmitry Peshkov reiterated on Wednesday that the freeze on foreign exchange reserves following Russian President Vladimir Putin’s invasion of Ukraine in February was an attempt to push it into “artificial bankruptcy.” “Russia has all the necessary resources to service its debts,” Peshkov told a news conference. “Significant amounts of our stocks are frozen in foreign countries, as you know. “Therefore, if they continue to be blocked in this way and if the transfers from the frozen amounts are blocked, then they will be served in rubles,” Peshkov said. “In other words, there is no basis for a real bankruptcy. They do not exist, not even close. “

Some of Russia’s foreign currency bonds contain terms in their lowercase letters that allow payment in rubles if they can not be made in dollars or euros, but the dollar bond that expired on Monday and a 2042 maturity bond that was to pay Coupon on Monday is not among them. A Russian dollar bond holder said he did not believe it would be possible to set up a “C” account at a Russian bank needed to receive ruble payments without violating sanctions. “If bondholders do not receive their money, they will perceive it as bankruptcy,” said Cristian Maggio, head of emerging market portfolio strategy at TD Securities. “But the Russians say they are willing to pay. “This is a very unusual situation and could eventually lead to legal action in a number of different jurisdictions where investors hold bonds.”