Russia says it made a payment to avoid default

Can sanctions make Russia default? 3:25 a.m. New York (CNN Business) — Russia says it has ordered the $117 million in interest payments it owes on Wednesday to be sent to investors, in a bid to avoid its first international default in more than a year. century. But he’s not out of the woods yet. That’s because the funds the country used to pay off the debt came from Russia’s frozen foreign assets, sanctioned for its attack on Ukraine, so it’s unclear whether investors will get their money. Anton Siluanov, Russia’s finance minister, told state media Russia Today that the country had fulfilled its obligations to creditors. But the “possibility or impossibility of fulfilling our obligations in foreign currency does not depend on us,” Siluanov said, according to RT, warning that the payment could not be made if the United States rejects it. Russia could default 1:15 “We have the money, we made the payment, now the ball is in America’s court,” he said. A Treasury spokesman said the United States would allow the payments to go ahead. The two coupons Russia must pay on maturing dollar-denominated Eurobonds serve as the first test of Russia’s ability to repay its debts as the world imposes massive sanctions on its economy. If the United States blocked the payment, Russia said it would try to pay in rubles instead of dollars. But that action could constitute a default, Fitch Ratings said Tuesday. This highlights the crisis Russia finds itself in: the nation has the money to pay its debts. It simply cannot access half of those funds after the West imposed unprecedented sanctions on its foreign exchange reserves, totaling some $315 billion, according to Siluanov. If the Russian government defaults, investor losses could start to pile up. Western investors are less exposed to Russia than before. The sanctions that followed the annexation of Crimea in 2014 have already encouraged them to reduce their exposure. But Russian entities owe international banks some $121 billion, according to the Bank for International Settlements. JPMorgan estimates that Russia had about $40 billion of foreign currency debt at the end of last year, with about half held by foreign investors. A default would therefore be bad news for Russia, which will have to meet its obligations in its virtually worthless currency, with no access to external financing. But global markets probably won’t be hurt too much. More payments are due soon. A much larger $2 billion payment scheduled for early April could create even bigger headaches for Moscow. — CNN’s Lindsay Isaac, John Harwood and Julia Horowitz contributed to this report