Russia to make foreign debt payments in rubles after U.S. ends exemption

The U.S. Treasury announced on May 24 it was closing the escape clause to the drastic financial sanctions imposed on Moscow

Russia said on May 25 that it will start paying its foreign debt in rubles after the United States ended an exemption allowing Moscow to make the payments in dollars held in Russia.

The U.S. Treasury announced on May 24 it was closing the escape clause to the drastic financial sanctions imposed on Moscow after it sent troops to Ukraine, pushing Russia closer to default.

“Noting that the refusal to extend this licence makes it impossible to continue servicing government foreign debt in U.S. dollars, payments will be carried out in Russia’s currency,” the finance ministry said in a statement on Telegram.

The ministry added that there would be a “possibility to later convert them (payments) into the original currency” using a Russian financial institution as the paying agent.

Punishing Western sanctions on Russia have largely severed the country from the international financial system, including blocking Moscow’s ability to access funds held in U.S. banks to pay its foreign creditors.

The U.S. move scrapped the final exemption, which was forcing President Vladimir Putin’s government to drain its war chest of foreign currency reserves to make payments.

Russian Finance Minister Anton Siluanov said in the statement that the current situation was “artificially created by an unfriendly country.”