Russia eyes gas-for-roubles template

Russia is considering settling pressing Eurobond obligations by applying the mechanism being used to process payments for its gas in roubles, the Kremlin and the finance minister said, as Moscow edges towards a default triggered by Western sanctions.

US authorities pushed Russia closer to a historic debt default on Wednesday by not extending a licence allowing it to pay bondholders, as Washington ramps up pressure following the military intervention in Ukraine.

Foreign Eurobond holders are awaiting two coupon payments in dollars and euros due last week but with a 30-day grace period.

Russia says it has cash and is willing to pay, refusing to acknowledge talk of a possible default.

Finance Minister Anton Siluanov said on Monday that Moscow will continue to service its external debts in roubles.

But for foreign Eurobond holders to receive payments in foreign currencies as per Russia's obligations, they would have to open rouble and forex accounts at a Russian bank, he told Vedomosti newspaper.

"As happens with paying for gas in roubles: we are credited with foreign currency, here it is exchanged for roubles on behalf of (the gas buyer), and this is how the payment takes place," he said.

"The Eurobond settlement mechanism will operate in the same manner, only in the other direction."  This system would allow Russia to bypass the Western payment infrastructure via Russia's National Settlement Depository (NSD), Siluanov told Vedomosti.

Unlike many Russian financial institutions, the NSD is not under western sanctions. There will be no limit on rouble conversion into forex and the scheme will be reviewed by the government soon, he said.