Russia steps up economic retaliation with Eurobond rouble buyback

A view shows Russian rouble coins in this picture illustration taken October 26, 2018. Picture taken October 26, 2018. REUTERS/Maxim Shemetov

LONDON, March 29 (Reuters) – Russia retaliated in what it has called an “economic war” with the West on Tuesday by offering to buy back its $2 billion Eurobonds maturing next month in roubles rather than dollars.

The finance ministry offer on Eurobonds maturing on April 4, Russia’s biggest debt payment this year, follows Western moves to tighten sanctions against the country over its invasion of Ukraine and to freeze Moscow out of international finance.

Moscow, which calls its actions in Ukraine a “special military operation”, says Western measures amount to “economic war”. In response, it has already demanded foreign firms pay for Russian gas in roubles rather than dollars or euros. read more

It was not immediately clear if bondholders would be forced to accept roubles if they rejected the offer, a move that would break the terms of the bond and would again raise the prospect of Russia’s first external sovereign default in a century.

Creditors said it might be aimed at helping Russian holders who now face restrictions in receiving dollar payments.

“This is a tender offer and not a final decision that these bonds will be paid in roubles. Perhaps, Russian authorities want to gauge investors’ willingness to accept payment in roubles?” said Seaport Global credit analyst Himanshu Porwal.

Tim Ash of BlueBay Asset Management, which is not a bondholder, said the move was part of a fight back by Russia’s central bank and finance ministry “to fend off default and stabilise markets and the rouble”.

Ash said the United States’ Office of Foreign Assets Control (OFAC), which enforces U.S. sanctions, “should make clear” it will not extend a deadline of May 25 for U.S. individuals or entities to receive payments on Russian sovereign bonds.

Russia’s finance ministry said in its statement on Tuesday that bondholders should submit requests to sell their holdings to the National Settlement Depository between 1300 GMT on March 29 and 1400 GMT on March 30.

SECURING PAYMENT

The Eurobonds would be bought at a price equivalent to 100% of their nominal value, it said.

A fund manager said the ministry’s offer might be designed to help Russian investors secure payment because Euroclear, an international settlement system, had been blocking dollar payments to the Russian clearing system.

“Everybody wants dollars right now – in and outside Russia – so I would assume that only local holders and local banks that have issues with sanctions will make use of this operation,” said Kaan Nazli, portfolio manager at…