Russia exports on debts from frozen reserves – RBC
“With probable defrosting”
Finance Minister Anton Siluanov said on March 10 that the ministry would first issue payment orders to agents in accordance with settlement documentation in order to make the payment in dollars. “This will be possible only when calculating the unfreezing of foreign currency accounts of the Central Bank and permits,” said Siluanov. In case of occurrence, the Ministry of Finance collected in rubles. On March 14, the agency received an order from JPMorgan Chase correspondent bank for $117 million, and it was executed.
CNN Broadcasting Company celebrationsthat “the funds used by the country for debt payments came from the frozen external assets of Russia, which were sued.” A spokesman for the US Treasury said that Washington would allow these payments. If the US was born, Moscow accumulated from blocked reserves a currency that would not have been blocked, it would translate into more reserves being moved out of the control of state authorities, however, by all appearances, recent payments from the Treasury have accumulated from blocked reserves, writes BlueBay strategist Asset Management Timothy Ash.
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According to RBC’s estimates, Russia paid $285 million in coupon income on emissions of Eurobond issues in March, suspiciously. Western investors received them, but Russian holders of currency government bonds have not yet received payments due to the suspension of settlements by Western clearing situations amid the events. On April 4, the Ministry of Finance will have to redeem $2 billion worth of Eurobonds. The Ministry of Finance has already announced a public offer for this issue on a voluntary redemption of securities for rubles, which was valid until the evening of March 30. The purpose of such an operation is to return money to holders in Russia.
At the last stage, the settlement system, with which the Ministry of Finance agreed during the initial placement of the paper, must transfer money to the final holders of the paper. Normally, this is a routine procedure, but not now: Euroclear has not yet made settlements with investors due to sanctions checks, a preventive source from RBC. Russian residents own about half of all sovereign Eurobonds located in locations, follows from the data of the Bank of Russia.
Unanswered questions
Brian O’Toole, a former US Treasury Department legal sanctions adviser to OFAC, told RBC that the US made it possible to use a significant pattern for this limited CBR bill, and “it’s strange from the point of view of Washington’s foreign policy goals.” Russia can pay investors dollars from frozen reserves. In the OFAC General License (.pdf), which generally allowed the generation of debt payments from Russia until May 25, there is a caveat: in order to make such payments, money cannot be debited from the accounts of the Central Bank, the Ministry of Finance or the National Welfare Fund in American financial institutions. Frozen dollars are assets of the Central Bank by belonging to an American institution. In Russia, hard currency receipts from exports are still high and there were several possibilities, like dollar coupons and without using blocked assets, the expert believes: for example, the Central Bank could simply sell rubles, buy dollars with them and direct them to a liability to financial expenses. Also, Russia could give an intermediate counterparty (an American bank) rubles, the bank could buy currencies on them on the external Russian market and transfer, the approval of the NES finance professor Oleg Shibanov. To circumvent the ban on signing funds with frozen accounts, Russia could use an institution acting on behalf of Russian debt enforcement rules, George Voloshin, prosecutor for the French branch of the consulting firm Aperio Intelligence. Another general license from the US Treasury, talking about the penetration of VEB.RF (it came under US verification blocking in late February), is in principle broad enough to use dollars to pay off sovereign debt, O’Toole.
After May 25, when the OFAC general license allowing all investors to accept payments on Russian external government debt expires, US residents must apply for interest-bearing permission to receive debt or a regular one from Russia, the US Treasury warned. After this period, the situation may change, and Russia will prohibit the choice of investors in the original currency, Shibanov said. For this, the Ministry of Finance has developed a temporary payment procedure, given the impossibility of paying in dollars or euros, funds will be transferred to non-residents in a special account in ruble equivalent.