In the latest twist on the story of whether Russia will waive its debts for the first time since 1998, the country’s finance ministry said the two payments – totaling $ 649 million and originally due on April 4 – were sent to Citigroup. in dollars. payment agent responsible for distributing cash to bondholders. “The Ministry of Finance has the resources and from a financial point of view there can be no talk of any bankruptcy,” said Elvira Nabiulina, head of the central bank. “But we are seeing difficulties with payments,” added Nabiullina, who was recently appointed for a third term. Russia has said it will use the ruble, which is not allowed by bond conditions, after U.S. authorities stopped US banks from processing payments earlier this month. Moscow then claimed that it had fulfilled its obligations and threatened to take legal action if the sanctions forced it to go bankrupt. Friday’s statement proposes a change of approach that could avoid bankruptcy if investors receive their dollars before a 30-day grace period ends May 4th. Citigroup declined to comment.

Russian bonds, which had traded at levels indicating that investors assumed bankruptcy was completely unavoidable, rose sharply in price. Stockbrokers offered to sell the April 2022 bond, which was due to repay this month, at prices as high as 80 cents on the dollar. Long-term Russian dollar bonds traded between 35 and 40 cents a dollar, rising between 10 and 15 cents a day. “There seems to be no bankruptcy at the moment,” said one bond investor. A U.S. official said Friday that the debt payments were announced on Friday, using dollars held in Russia and not US assets, which means they would no longer be available in Moscow to continue financing the war in Ukraine. The transaction was not explicitly approved by the US, but was allowed on a segregated basis for such payments that had been implemented as part of the sanctions regime. The use of infrequent dollars in debt repayment marks a “substantial victory” for US authorities, said Paul McNamara, emerging market bond manager at GAM. “It also implies that Russia envisages something other than an indefinite freeze on foreign economic relations.” Even if the late payments arrive before the end of the grace period on Wednesday, it is not yet clear how Russia will continue to service its foreign debt after May 25, when the US sanctions waiver that allows to U.S. investors to receive interest payments from Russia. . Also on Friday, Russia’s central bank cut interest rates by 3 percentage points to 14%. The central bank said annual inflation rose to 17.6 percent in April and will reach 18-23 percent in 2022. It expects the economy to shrink by 8 to 10 percent this year. Nabiulina said “transient” high inflation was an “inevitable” part of a “structural transformation” of the economy following sanctions that cut Russia off from world markets. “That is why we are not trying to bring inflation back to target at any cost,” he said. “Excessively compressed demand will freeze structural transformation. “And then we would have an economy where prices are rising slowly, but the variety of goods and services would be even more limited and some basic goods would be completely unavailable.”