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Russia says it made a payment to avoid default

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Russia says it made a payment to avoid default

That’s because the money the country uses to pay its debts comes from foreign assets frozen by Russia, sanctioned for its attacks on Ukraine — so it’s unclear whether investors will receive their money.

Russian Finance Minister Anton Siluanov told state media Russia Today that the country has fulfilled its obligations to creditors. But according to RT, Siluanov said “the possibility or impossibility of meeting our obligations in foreign currency is not up to us” and warned that the payment may not go through if the US does not allow it.

“We had money, we paid for it, and now the ball is on the courts in America,” he said.

A Treasury spokesman said the U.S. would allow the payments to pass.

The two coupons Russia has to pay on maturing dollar-denominated euro bonds is the first test of Russia’s ability to pay its debt as the world imposes massive sanctions on its economy.

If the U.S. blocks payments, Russia says it will try to pay in rubles instead of dollars. But Fitch Ratings said on Tuesday that the action could constitute a default.

It highlights Russia’s predicament: The country has enough money to pay its debts. According to Siluanov, it has been unable to access about half of its foreign exchange reserves, which total about $315 billion, after unprecedented sanctions were imposed by the West on its foreign exchange reserves.

Investors’ losses could start to mount if the Russian government defaults.

Western investors have less exposure to Russia than in the past. Sanctions following the annexation of Crimea in 2014 have encouraged them to reduce contacts. But Russian entities owe international banks about $121 billion, according to the Bank for International Settlements.

JPMorgan estimates that Russia had about $40 billion in foreign currency debt at the end of last year, about half of which was held by foreign investors. So a default would be bad news for Russia, which would have to meet its obligations in almost worthless currency, with no access to foreign financing. But global markets may not be hurt too much.

More payments are due soon. A larger $2 billion payment, scheduled for early April, could spell more trouble for Moscow.

— CNN’s Lindsay Isaac, John Harwood and Julia Horowitz contributed to this report

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