Russia and Russian companies will be allowed to pay foreign creditors in rubles, according to a decree signed by President Vladimir Putin on Saturday, as a way to service debt while capital controls remain in place.
The decree establishes temporary rules for sovereign and corporate debtors to make payments to creditors from “countries that engage in hostile activities” against Russia, its companies and citizens. The government specified on Saturday that it will prepare a list of such countries within two days.
Russian corporate bonds denominated in foreign currencies have plunged to deeply distressed levels in recent days as investors weighed the impact of sanctions imposed on the country in the wake of its invasion of Ukraine. The Russian government responded to the penalties by dramatically reducing access to foreign currencies, which could restrict the ability of bondholders to receive interest and principal payments.
Separately, clearing houses Clearstream and Euroclear stopped accepting the ruble as settlement currency and have excluded all securities issued by Russian entities from all Triparty transactions, barring a traditional channel used to make payments to bondholders.
According to Saturday’s decree on servicing foreign-held debt, payments will be considered executed if they are carried out in rubles at the central bank’s official rate.
