Russia offers foreign debt payment system similar to gas one

MOSCOW (AP) — Russia said Monday it may use an arrangement similar to that used for payments for its gas supplies to pay its dollar-denominated foreign debts.

The Vedomosti business daily quoted Finance Minister Anton Siluanov as saying that Russia will offer the holders of its Eurobond obligations to accept a payment system bypassing Western financial infrastructure.

Russia previously has offered the customers receiving its natural gas to establish an account in dollars or euros at Russia’s third-largest bank, Gazprombank, then a second account in rubles. The importer would pay the gas bill in euros or dollars and direct the bank to exchange the money for rubles.

The system was established on Russian President Vladimir Putin’s order and aims to avoid a risk of payments for gas being frozen as part of Western sanctions against Russia for its action in Ukraine.

Siluanov told Vedomosti that a mechanism similar to that will be set for Eurobond holders, who will be offered to open foreign currency and ruble accounts at a Russian bank.

“In payments for gas, we are credited with foreign currency and it’s converted into rubles,” Siluanov was quoted by Vedomosti as saying. “The Eurobond settlement mechanism will work in the same way, just in the other direction.”

‘Now I am a beggar’: Fleeing the Russian advance in Ukraine
Serbia ignores EU sanctions, secures gas deal with Putin
War surges Norway’s oil, gas profit. Now, it’s urged to help
Fleeing the Russians: Evacuations are slow, arduous, fraught
He said payments will be made through Russia’s National Settlement Depository.

Asked about Siluanov’s comments, Kremlin spokesman Dmitry Peskov told reporters that “the practice of payments for gas has proven to be convenient for both the seller and the buyers, so why not to use it in the opposite form.”

On Wednesday, the U.S. Treasury Department led by Janet Yellen allowed a license that permitted Russia to keep paying its debtholders through American banks to expire. The license applied to American investors and international investors who have dollar-denominated debt or bonds.

Russia says it will pay dollar-denominated foreign debt in rubles, a move that is likely to be seen by foreign investors as a default.

The U.S. Treasury Department led by Janet Yellen allowed a license to expire Wednesday that permitted Russia to keep paying its debtholders through American banks. The license applied to American investors and international investors who have dollar-denominated debt or bonds.

Russia responded to the move by saying that it will pay in rubles and offer “the opportunity for subsequent conversion into the original currency,” and Siluanov spelled it out Monday by describing the proposed payment mechanism.

It’s not clear whether the Russian offer will be accepted by Eurobond holders, allowing Russia to avoid a default.

Russia has not defaulted on its international debts since the 1917 Bolshevik Revolution, when the Russian Empire collapsed and the Soviet Union was created. Russia defaulted on its domestic debts in the late 1990s during the Asian financial crisis, but was able to recover from that default with the help of international aid.

Sri Lanka’s prime minister said Sunday that protesting youth groups will be invited to be part of governance under political reforms he is proposing to solve the country’s political crisis triggered by an economic collapse.

Prime Minister Ranil Wickremesinghe said that under proposed constitutional reforms, powers of the president will be clipped and those of Parliament strengthened. In a televised statement to the nation, he said that governance will be broad-based through parliamentary committees where lawmakers, youth and experts will work together.

“The youth are calling for a change in the existing system. They also want to know the current issues. Therefore, I propose to appoint four youth representatives to each of these 15 committees,” Wickremesinghe said.

Protesters consisting of mainly young people have camped out outside the president’s office for more than 50 days. They’re demanding the resignation of President Gotabaya Rajapaksa, holding him and his family responsible for the country’s worst economic crisis. They also want an overhaul of a system of governance, saying successive administrations since independence from Britain in 1948 have misruled the country leading to economic and social crises.

Russia offers foreign debt payment system similar to gas one
War in Ukraine adds to food price hikes, hunger in Africa
EU wrestles with Russia oil embargo as leaders gather
Coal ash workers dying as lawsuit over illnesses drags on
Students have led nearly daily protests in capital Colombo and elsewhere as Sri Lanka tethers on the brink of bankruptcy. It has already defaulted on its foreign loans, and is battling acute shortages of essential goods like cooking gas, fuel and medicines. People have been forced to wait for hours in long lines to try to buy goods and many still go empty handed.

The country’s foreign currency reserves have dwindled to just enough to purchase two weeks of needed imports.

Authorities announced last month that they were suspending repayment of nearly $7 billion foreign debt due this year. Sri Lanka has to pay up $25 billion through 2026. Total foreign debt of the Indian Ocean island nation is $51 billion.

According to Wickremesinghe’s proposal, one of the youth representatives will be appointed by the so-called “youth parliament” and the other three will come from protesting groups and other activist organizations. “The methodology used to chose these individuals can be decided by the youth organizations themselves,” he said.

Youtube video thumbnail
There has been no immediate comment from youth groups to his proposal. Setting up new broad-based parliamentary committees apparently can be done under the current constitution, but broader reforms such as reducing presidential powers would need approval of the Supreme Court and a two-thirds parliamentary majority. It isn’t clear when the bill will be introduced for debate.

Violence erupted on May 9, when Rajapaksa supporters attacked peaceful protesters. Nine people including a governing party lawmaker were killed and homes of Cabinet ministers burnt down. The unrest nearly dismantled the Rajapaksa dynasty after the president’s brother, Mahinda Rajapaksa, resigned as prime minister. Three of the president’s siblings and a nephew had already quit their Cabinet posts.

Sri Lanka has been ruled by a powerful executive presidential system for nearly 45 years, and President Gotabaya Rajapaksa strengthened it further with constitutional changes as soon as he was overwhelmingly elected in 2019.

Wickremesinghe has said that he will have an economic reform plan ready within two weeks to seek approval from the International Monetary Fund for a bailout package.