RT reported that on May 25, Chairman of the Russian State Duma (Russian House of Representatives) Vyacheslav Volodin said Moscow plans to pay off foreign debt in rubles. This happened after the US blocked Russia from paying foreign currency debts to US bonds.
Mr. Volodin added that Russia has all the monetary resources needed for payments.
The United States and satellite countries support Washingtons decisions so they should get used to the ruble, Volodin wrote on his Telegram account. He cited Russia's experience in requiring payment for gas purchases in rubles as an example of how debt payment in Russian domestic currency can be effective.
The Russian Finance Ministry also said that Moscow will continue to fulfill its state debt obligations, despite tightening international restrictions.
The US Treasury Departments decision to refuse to extend the license first of all, violates foreign investors rights to Russian debt instruments and undermine confidence in Western financial infrastructure, the Russian Treasury Department said in a statement. The statement added, "The Russian Finance Ministry, as a responsible borrower, confirmed its readiness to continue serving and settling all debt obligations."
The US Treasury Department previously announced on May 24 that it would not extend a sanctions exemption allowing Russia to pay government debts to US investors, in a move that US officials had previously feared would put Russia in a state of technical bankruptcy. The exemption expired at 4:01 a.m. GMT on May 25.
Meanwhile, Russian Finance Minister Anton Siluanov noted that the current situation is not the same as in 1998, when Russia failed to borrow rubles domestically due to the financial crisis. Mr. Siluanov emphasized: "Now we have the money and are ready to pay".
The Russian government has tried to pay in domestic currency, but many bonds do not allow a refund in rubles. Moscow has paid interest due at around $100 million on May 27 for two types of bonds: one type requiring interest in USD, euro, British Pound or French fries, the other type that can be paid in rubles. After May 25, Russia will still have international bond payments of nearly $2 billion due before the end of the year.
So far, Russia has managed to make all due payments to foreign creditors. The Kremlin described the US's recent actions as a failed Western financial system, which failed to fulfill its financial obligations to Russia.
Meanwhile, on May 25, the Russian ruble set its highest exchange rate in many years against the USD and euro, even as the central bank loosens capital control.
The ruble is traded for less than 58 rubles to exchange for 1 euro, the strongest level since May 2015 and under 56 rubles to exchange for 1 USD, the strongest level since February 2018. This exchange rate according to Moscow Exchange data as of 07:15 GMT on May 25.
The ruble continues to strengthen even as the central bank loosens capital control measures starting in March to protect the currency from Western sanctions.
On May 23, ahead of the tax payment deadline for exporters this week, the Russian regulatory agency eased requirements for mandatory conversion of foreign currency revenue into rubles. Exporters now only have to exchange 50% of their profits, down from the previous 80%. This figure is considered one of the main factors behind the strengthening of the ruble. In addition, the central bank is expected to continue cutting key interest rates at its extraordinary policy meeting on May 26.
Russia's domestic currency continues to strengthen this week as many European companies seem to be complying with Russia's request to pay for gas purchases in rubles.
Experts note that capital control measures, reduced imports and rising energy prices have made the Russian currency about 25% stronger than before the sanctions related to Ukraine.
Bloomberg recently called the ruble the world's most active currency this year. However, some Western analysts have claimed that central bank-imposed capital control measures are keeping the official exchange rate of the ruble at a hypothetically high level.
