Russia avoids first foreign debt default since Bolshevik revolution

Russia has avoided its first default on foreign debt since the Bolshevik revolution after it paid creditors in dollars, it was revealed today.

Holders of Russian eurobonds confirmed they had received payments after the Kremlin rolled back on its decision not to meet debt obligations last Friday.

The payment comes before a 4 May grace period deadline which would have tipped Russia into foreign debt default for the first time since 1918 if it had not paid bondholders.

Top ratings agencies have downgraded Russia debt gradings, meaning investors should expect to absorb losses.

A package of western sanctions launched to hobble Russia’s economy in response to its invasion of Ukraine had thrown into doubt whether bondholders would receive payments.

Russia’s central bank’s foreign reserves have been frozen, limiting its ability to meet foreign debt obligations.

However, a Kremlin demand that gas supplies be paid in roubles has strengthened Russia’s foreign currency reserves.

A US official confirmed the Kremlin had made the payment without using assets in America, adding the origins of the funds were unclear, according to reports by Reuters.

Moscow said last week it will make a $650m (£518m) payment it owed in principal and interest payments.

Russia has another tranche of coupon payments due on 27 May on a dollar-denominated bond issued in 2017 and euro-denominated bond sold in 2021.