UPDATED: Russia to use yuan from its forex reserves, finance minister says

March 14 (Reuters) – Russia will use Chinese yuan from its foreign exchange reserves after Western sanctions blocked Moscow’s access to the U.S. dollars and euros in the reserves, Finance Minister Anton Siluanov said on Monday.

The finance ministry will instruct the payment of a coupon on a sovereign Eurobond issue due on Wednesday in foreign currency but payment could alternatively be made in roubles if the forex payment request is rejected by Western banks, he said.

From Russia’s point of view, paying a Eurobond coupon in roubles would still mean the government is fulfilling its foreign debt obligations, Siluanov added.

•  Russia’s finance ministry said on Monday it had approved a temporary procedure for repaying foreign currency debt, but warned that payments would be made in roubles if sanctions prevent banks from honouring debts in the currency of issue.

Western sanctions over events in Ukraine have cut Russia off from key parts of global financial markets, triggering its worst economic crisis since the 1991 fall of the Soviet Union.

“Claims that Russia cannot fulfil its sovereign debt obligations are untrue,” Finance Minister Anton Siluanov said in a statement. “We have the necessary funds to service our obligations.”

The government is due to pay $117 million on two of its dollar-denominated bonds on Wednesday.

The ministry said it had approved a temporary procedure to allow banks to make payments in foreign currency, but said the possibility of those payments going through would depend on sanctions.

Several Russian banks have been banned from the SWIFT international payments network, hampering efforts to move money outside of Russia.

If payments are not possible, the finance ministry said it would make Eurobond repayments in roubles, which is tantamount to a default. The rouble has dived to record lows in recent weeks.

“The freezing of the central bank and government’s foreign currency accounts can be seen as a desire from several Western countries to organise an artificial default,” Siluanov said.

(Reporting by Reuters; Editing by Christopher Cushing and Kim Coghill)

(Reporting by Reuters; Editing by Christopher Cushing)