The EMEA Credit Derivatives Determinations Committee said it decided to meet again on Friday to allow market participants to investigate whether they will be able to take part in the auction without breaking U.S. sanctions.
The step comes after the committee said on Tuesday that it had decided that Russia had failed to pay some interest for a $2 billion 10-year Eurobond with a 4.5% coupon maturing on April 4. This puts Russia at risk of its first official default since the Soviet era.
That ruling potentially triggers credit default swaps, tradable derivatives work as insurance policies against bond defaults. Investors agree on what "credit events" — such as a failure to pay — trigger payouts for them when they enter into a credit default swap.
The U.S. Treasury updated its official guidance on Monday, saying that provisions in three of White House executive orders prohibit U.S. investors from purchasing new debt or equity securities issued by Russian government entities.
The derivatives committee said in its post-meeting statement that market participants needed time to consider the implications the guidance may have on whether they can participate in an auction.
Dmitry Peskov, President Vladimir Putin's press secretary, denied the Russian government was at risk of defaulting during a press conference on Wednesday.
"The West truly is pushing [Russia] to a default, but here we need to stipulate all the time — to an artificial default," Peskov said in Russian in comments carried by newswire Interfax. "This is a man-made default, because there is absolutely no foundation whatsoever for a default by the Russian Federation."
The Kremlin is working to counter EU sanctions against Russia's national settlement depository — the largest securities depository in the country — as it cuts off more and more of the Russian economy from Europe because of its invasion of Ukraine. The Kremlin plans to use this depository to make payments on its Eurobonds.
The committee, which covers Europe, the Middle East and Africa, is made up of representatives of banks and investment companies, including Mizuho Securities Co. Ltd., BNP Paribas and Elliott Management Corporation. It is part of the International Swaps and Derivatives Association, a global trade body and standards-setter for derivatives.
The Kremlin was forced to make early bond payments in May after the U.S. Treasury said it would not renew the license Russia relies on for debt payments, forcing Putin's government into a technical default.
Russia responded by saying it would make all foreign debt payments in rubles, even if it was denominated in dollars or Euros.
Russia did not waive its sovereign immunity in many of its bonds, which would probably leave bondholders unable to sue over defaults and collect what they are owed.
Credit Derivatives Determinations Committees are made up of 10 companies that create derivatives and five voting companies that purchase derivatives, along with observer members that are involved in the transactions. Up to three firms can consult at each meeting.
--Additional reporting by Caroline Simson. Editing by Joe Millis.
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