Update: Russia Adopts Decree on Repayment in Russian Rubles of Debt to Foreign Creditors

March 07, 2022

President Vladimir Putin issued a decree introducing a special procedure for repayment of debt by the Russian state bodies as well as Russian residents (Russian Debtors) to non-Russian creditors related to foreign states that commit “unfriendly actions towards Russia” or that are controlled by such non-Russian creditors (deemed “Creditors from Unfriendly States”). The new procedure will apply to payments exceeding 10 million rubles ($95,000) per month and effectively prevent the free receipt of repayment amounts by Creditors from Unfriendly States. 

This new decree no. 95, titled “On Temporary Order of Discharge of Obligations Towards Certain Foreign Creditors” (Decree) was issued on March 5, 2022, and becomes effective from the date of its publication. Pursuant to the Decree, a Russian Debtor may opt to repay in rubles hard currency debt owed to a foreign creditor, at the official exchange rate of the Central Bank of Russia (CBR) (which is likely to be lower than the market rate of exchange).

Who are Creditors from Unfriendly States?

On March 7, 2022, the Russian government determined the initial list of countries committing “unfriendly actions towards Russia,” which included the United States, Canada, the European Union, the United Kingdom, Ukraine, Montenegro, Switzerland, Albania, Andorra, Iceland, Liechtenstein, Monaco, Norway, San Marino, North Macedonia, Japan, South Korea, Australia, Micronesia, New Zealand, Singapore and Taiwan. This list may be expanded if more countries impose sanctions on Russia.

What Debt is Subject to New Restrictions?

The debt subject to the restrictive measures includes loans, credits, and financial instruments. Technically, prepayments under export contracts are not mentioned in the Decree, although it remains unclear whether this Decree will apply to the debt arising from the commercial prepayment transactions.

Discharge of Debt to Creditors from Unfriendly States

If the debt is owed to a Creditor from Unfriendly State, a Russian Debtor may pay the ruble amount of the debt to a special type “C” account opened in the name of a foreign creditor or a foreign nominee holder of securities. Such account may be opened with a Russian or a non-Russian bank (although it remains unclear as to how a foreign bank will be able to operate such an account) or—with respect to obligations related to the issue of securities—with the National Settlement Depository.

Although “C” accounts are maintained in the name of foreign creditors, it appears that they can be opened at the request of a Russian Debtor without the consent or other involvement of a foreign creditor. The regime of such accounts will be determined by the CBR and the holders of such accounts will only be allowed to perform a limited number of transactions (e.g., make transactions with securities registered in type “C” accounts, make tax payments, or conduct transfers between such “C” accounts). Currently, the owners of “C” accounts are not allowed to convert rubles credited to such accounts into foreign currency and/or to transfer any amounts from “C” accounts outside Russia.

Discharge of Debt to Other Foreign Creditors

If the debt is owed to a foreign creditor that is not a Creditor from Unfriendly State, a Russian debtor may opt to discharge the debt in the ruble equivalent calculated at the official exchange rate of the CBR as of the payment date. No payment to a special “C” account is required in such case and a foreign creditor may convert the funds into foreign currency and transfer them outside Russia.

Anti-Avoidance Provisions

The Decree specifically restricts potential avoidance of the rule through assignment of debt from a Creditor from Unfriendly State to a Russian creditor or a foreign creditor that is not a Creditor from Unfriendly State. If such assignment takes place after March 1, 2022, the relevant Russian creditor or foreign creditor will be treated in the same way as a Creditor from Unfriendly State, (i.e., a Russian Debtor may make a payment in discharge of debt to a restricted “C” account).  

Certain Exemptions

The special debt discharge procedure stipulated by the Decree shall not apply to the persons directly or indirectly (including through Creditors from Unfriendly States) controlled by Russian residents or the Russian state if the ultimate beneficiaries of the payments are Russian citizens and companies and this information has been disclosed to the Russian tax authorities.

The Decree provides that the CBR (with respect to Russian Debtors that are financial institutions) and the Ministry of Finance (with respect to other Russian Debtors) are entitled to determine alternative procedures for debt repayment to foreign creditors. Until such procedures are adopted, Russian Debtors may receive individual approvals by the relevant authority to fulfill obligations outside the framework of the Decree.

Impact on Existing Credit Facilities

Most international credit facility agreements contain a currency indemnity clause which contemplates that if any sum due from a debtor to the creditor has to be converted to another currency for specific purposes, the debtor shall indemnify the creditor with respect to any loss, cost, or liability arising from the conversion. Further, most credit facilities provide that repayment must be made in “immediately available” funds and payment to an “C” account is unlikely to be considered as a “proper” repayment. However, such provisions in the facility agreements are likely to be unenforceable in Russia to the extent the Decree applies to the relevant loan.


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