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Russia edged closer to a potential default on its international debt on Wednesday as it paid dollar bondholders in roubles and said it would continue to do so as long as its foreign exchange reserves are blocked by sanctions.
The US on Monday stopped Russia from paying holders of its sovereign debt more than $600 million from frozen reserves held at US banks, saying Moscow had to choose between draining its dollar reserves at home and default.
Russia has not defaulted on its external debt since reneging on payments due after the 1917 Bolshevik Revolution. However, its bonds have remerged as a flashpoint in the diplomatic crisis and tit-for-tat sanctions between Moscow and western capitals.
“This speeds up the timeline around when Russia runs out of space on willingness and ability to pay,” said one fund manager holding one of the bonds due for payment on Monday.
The Kremlin said it would continue to pay its dues.
“Russia has all necessary resources to service its debts … If this blockade continues and payments aimed for servicing debts are blocked, it [future payment] could be made in roubles,” Kremlin spokesman Dmitry Peskov said.
Moscow had managed to make a number of foreign exchange coupon payments on some of its 15 international bonds with an outstanding face value of about $40 billion before the US stopped such transactions.
Russia's finance ministry said on Wednesday it had to pay roubles to holders of its dollar-denominated Eurobonds maturing in 2022 and 2042 as a foreign bank had refused to process an order to pay $649m to holders of its sovereign debt.
The finance ministry said the foreign bank, which it did not name, rejected Russia's order to pay coupons on the two bonds and also did not process payment of a Eurobond maturing in 2022.
Russia's ability to fulfil its debt obligations is in focus after sweeping sanctions in response to what Moscow calls “a special military operation” in Ukraine have frozen about half of its reserves and limited access to global payment systems.
Russia may consider allowing foreign holders of its 2022 and 2042 Eurobonds to convert rouble payments into foreign currencies once access to its forex accounts is restored, the finance ministry said.
Until then, a rouble equivalent of Eurobond payments aimed at bondholders from so-called unfriendly nations will be kept in special “C” type accounts at Russia's National Settlement Depository, the ministry said.
Both bonds were issued in 2012 and stipulate payment in US dollars — unlike some bonds that were sold later and allow for payment in alternative currencies such as euros, British pounds, Swiss francs or even roubles.
Russia has a 30-day grace period to make the dollar payment. However, if the cash does not show up in bondholders' accounts within that time frame, it would constitute a default, global rating agencies have said.
Moscow introduced stringent capital controls to shore up its currency after the war began. This, together with financial sanctions, makes it impossible for foreign investors to repatriate any payments.
Default warnings were flashing brightly again on Wednesday. One-year upfront credit default swaps — a way of insuring exposure to Russia's sovereign debt — jumped to 69 points, from 60 points, said IHS Markit.
Russia's longer-dated dollar bonds, where trading has all but ceased, were quoted well below 20 cents on the dollar, while euro-denominated issues were bid at 15 cents.
Russia dismissed this as being a default situation.
“In theory, a default situation could be created but this would be a purely artificial situation,” Mr Peskov said. “There are no grounds for a real default.”
City's slump
L - Juventus, 2-0
D - C Palace, 2-2
W - N Forest, 3-0
L - Liverpool, 2-0
D - Feyenoord, 3-3
L - Tottenham, 4-0
L - Brighton, 2-1
L - Sporting, 4-1
L - Bournemouth, 2-1
L - Tottenham, 2-1
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
The bio
Favourite book: Peter Rabbit. I used to read it to my three children and still read it myself. If I am feeling down it brings back good memories.
Best thing about your job: Getting to help people. My mum always told me never to pass up an opportunity to do a good deed.
Best part of life in the UAE: The weather. The constant sunshine is amazing and there is always something to do, you have so many options when it comes to how to spend your day.
Favourite holiday destination: Malaysia. I went there for my honeymoon and ended up volunteering to teach local children for a few hours each day. It is such a special place and I plan to retire there one day.
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
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Profile of RentSher
Started: October 2015 in India, November 2016 in UAE
Founders: Harsh Dhand; Vaibhav and Purvashi Doshi
Based: Bangalore, India and Dubai, UAE
Sector: Online rental marketplace
Size: 40 employees
Investment: $2 million
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THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
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Coming soon
Torno Subito by Massimo Bottura
When the W Dubai – The Palm hotel opens at the end of this year, one of the highlights will be Massimo Bottura’s new restaurant, Torno Subito, which promises “to take guests on a journey back to 1960s Italy”. It is the three Michelinstarred chef’s first venture in Dubai and should be every bit as ambitious as you would expect from the man whose restaurant in Italy, Osteria Francescana, was crowned number one in this year’s list of the World’s 50 Best Restaurants.
Akira Back Dubai
Another exciting opening at the W Dubai – The Palm hotel is South Korean chef Akira Back’s new restaurant, which will continue to showcase some of the finest Asian food in the world. Back, whose Seoul restaurant, Dosa, won a Michelin star last year, describes his menu as, “an innovative Japanese cuisine prepared with a Korean accent”.
Dinner by Heston Blumenthal
The highly experimental chef, whose dishes are as much about spectacle as taste, opens his first restaurant in Dubai next year. Housed at The Royal Atlantis Resort & Residences, Dinner by Heston Blumenthal will feature contemporary twists on recipes that date back to the 1300s, including goats’ milk cheesecake. Always remember with a Blumenthal dish: nothing is quite as it seems.
Graduated from the American University of Sharjah
She is the eldest of three brothers and two sisters
Has helped solve 15 cases of electric shocks
Enjoys travelling, reading and horse riding
