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Kremlin Looks to Skirt Default With Alternative Payment Systems

RUSSIA
  • UK officials see the Russian advance on eastern Ukraine as having stalled, although added that Russian forces are moving toward the southern approaches of Lysychansk – a city in the Donbas.
  • Markets continue to wait the fate of looming interest payments due from bonds that matured in May (the grace period ends on Sunday). Yesterday, Putin signed a decree on temporary procedures for fulfilling Russia's foreign debt obligations. This would allow Russia to continue to argue that they're fulfilling their foreign debt obligations after the failure of the US to renew General Licence 9A (preventing Russia from making FX payments to investors) some weeks ago.

The measures include:

  • Allowing the use of “substitute” bonds to repay Eurobonds, while also cancelling the cross-default provision on bonds (meaning default on one line of bonds won’t necessarily trigger a broader default condition).
  • Allowing Russia will pay RUB on its Eurobond obligations that can be later converted into FX at the exchange rate on the day of payment.

Focus remains on the ongoing BRICS summit, with Putin taking part via video today. Foreign minister Lavrov visits Azerbaijan.

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  • UK officials see the Russian advance on eastern Ukraine as having stalled, although added that Russian forces are moving toward the southern approaches of Lysychansk – a city in the Donbas.
  • Markets continue to wait the fate of looming interest payments due from bonds that matured in May (the grace period ends on Sunday). Yesterday, Putin signed a decree on temporary procedures for fulfilling Russia's foreign debt obligations. This would allow Russia to continue to argue that they're fulfilling their foreign debt obligations after the failure of the US to renew General Licence 9A (preventing Russia from making FX payments to investors) some weeks ago.

The measures include:

  • Allowing the use of “substitute” bonds to repay Eurobonds, while also cancelling the cross-default provision on bonds (meaning default on one line of bonds won’t necessarily trigger a broader default condition).
  • Allowing Russia will pay RUB on its Eurobond obligations that can be later converted into FX at the exchange rate on the day of payment.

Focus remains on the ongoing BRICS summit, with Putin taking part via video today. Foreign minister Lavrov visits Azerbaijan.