Russian bondholders who were due to receive an interest payment totaling $117 million yesterday told international agencies that so far the funds had not been deposited into their accounts.. The economic sanctions imposed by the West on Russia after the invasion of Ukraine make payments like this difficult and have the potential to push the country into its first international default in more than 100 years. The financial market is expectantly following the destination of these payments, since a default could have unpredictable consequences.

Russia had to pay USD 117 million dollars in coupons of two of its international bonds on Wednesday, March 16, although there is a 30-day grace period for payment before declaring a default.

A Europe-based bondholder told Reuters that the payment had not yet arrived . Earlier, on Thursday, the same agency had spoken with Taiwanese holders of the two Russian bonds. They also said that they had not yet received the interest payment.

Russian Finance Minister Anton Siluanov said on Wednesday that Moscow had made the payment, and the money had reached the US correspondent bank . Now it was up to Washington to clarify whether liquidation was possible, in accordance with the rules imposed in the midst of the economic sanctions package. He also said that he would update the market separately on whether the payment was deposited into the paying agent Citibank account.

Sanctions imposed after Moscow’s invasion of Ukraine isolated Russia from the global financial system and blocked most of its gold and foreign exchange reserves , while Moscow itself imposed countermeasures, all of which complicate payments.

But several creditors and sources familiar with the situation in Asia and Europe said the funds had not yet been received by the bondholders.

The Ministry of Finance planned to send the equivalent amount of the interest payment in rubles if the dollar payments did not reach foreign bondholders, something that, according to the credit rating agency Fitch, would constitute a default, if not corrected in a grace period of 30 days.

Typically, a country would pay its creditors abroad by sending the money to a correspondent bank, which transfers the funds to the title’s paying agent, in this case Citi, before it reaches the individual holders’ deposit accounts via liquidation steps to confirm ownership of assets.

Russia has 15 international bonds with a face value of about $40 billion outstanding, about half held by foreign investors.

The coupon payments due March 16 are the first of several, with another $615 million due during the rest of the month. The first principal payment is due on April 4, with a $2 billion bond.

The array of international sanctions raised questions about whether such complex, multi-step transactions would run into difficulties, not least because Russia’s central bank is among the institutions targeted by Western sanctions.

Among investors there is no clear interpretation as to whether or not the sanctions imposed on Russia allow the payment of debt maturities to private creditors. The Office of Foreign Assets Control (OFAC), the arm of the US Department of the Treasury in charge of enforcing the sanctions, blocks Russian debt operations but leaves a window until May 25 to give the financial entities involved time. in businesses affected by the sanctions to dispose of their assets, as detailed on their website. In general, the exceptions are designed to maintain the trade in hydrocarbons until the complete imposition of sanctions.

According to the Russian Ministry of Finance, the correspondent bank in charge of the payment is in contact with OFAC to clarify whether the interest can be deposited in the accounts of the bondholders.