NEW YORK (Market Watch) - Russia and Russian companies will be allowed to pay foreign creditors in rubles, under a decree signed by President Vladimir Putin, as a way to service debt while capital controls remain in place, Bloomberg reported .
The decree sets up 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 prices of Russian corporate bonds denominated in foreign currencies have plunged in recent days after sanctions were imposed on the country in the wake of Russia-Ukraine crisis. The Russian government responded to the sanctions by 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.
According to the decree on servicing foreign-held debt, payments will be considered made if they are carried out in rubles at the central bank’s official rate. The rule applies to amounts in excess of 10 million rubles ($81,358) per month.