Vyacheslav Volodin — the chair of Russia's lower chamber, the Duma — said on his personal Telegram channel that the country will make all its debt payments in rubles no matter in what currency a bond is denominated. He made the announcement after the Treasury said it would not renew General License 9C before it expired on Wednesday.
The license had allowed U.S. investors to receive payments on bonds and other debt instruments from sanctioned Russian government bodies since it was originally issued on Feb. 24, after Russia invaded Ukraine. Telegram, an encrypted digital messaging service widely used in Russia, allows users to set up channels where users can post content to subscribers.
Russia's ministry of finance said this month it had made early payments on some bonds after U.S. Treasury Secretary Janet Yellen warned that Washington would not extend the license.
"Having artificially banned payments in dollars, Washington is aiming to create problems for Russia," Volodin wrote on Telegram. "Our country has an answer to this provocation."
The United Russia politician then said that Russia has all the necessary funds to fulfill its debt payments and that the country is in a "good market situation" after the ruble strengthened. "And the U.S. and its satellites supporting their decisions, let them get used to the ruble," Volodin added.
Russia's largest lender, Sberbank, said on Tuesday that it made ruble payments on dollar bonds following Vladimir Putin's executive orders after its initial payments were blocked by U.S. and U.K. sanctions.
Russia's previous attempt to pay $649.2 million in rubles on foreign currency-denominated bonds was ruled to be a "Potential Failure To Pay" by a European debt committee, meaning it would have automatically defaulted once the usual grace period expired.
The Kremlin managed to avoid its first default in more than a century by using its domestic dollar reserves to make the payments after the committee's ruling, since sanctions have frozen over $300 billion in foreign-held currency reserves.
Russia first tried to make the payments on the bonds with dollars in April. But it was blocked by sanctions because it was using a U.S. correspondent bank, forcing it to use its National Settlement Depository to fulfill its obligations.
Sanctions have already forced some government bodies to default, including the state-owned railway company, RZD OAO, which failed to pay on its debt due to Western sanctions.
Russia's anticipated default on its $40 billion of sovereign debt would leave U.S. creditors in a poor position to make up their losses with litigation, as the country did not waive its sovereign immunity when it issued its bonds.
--Additional reporting by Caroline Simson. Editing by Ed Harris.
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