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Australia to pay interest to Russia on Treasury bonds

Calling it a ‘very minor amount’, Treasurer Josh Frydenberg said the government had found other ways to keep Russia from benefiting any further on the bonds it holds

Australia will continue to pay interest to Russia on $8 billion worth of Treasury bonds but Treasurer Josh Frydenberg is adamant the he has found other ways to limit the financial gain that comes with owning a slice of the debt.

Calling it a ‘very minor amount’, Frydenberg said the government had found other ways – through its introduction of sanctions – to keep Russia from benefiting any further on the bonds it holds.

The important point is that the Russian government will not be able to sell those bonds to Australian entities because of sanctions, Frydenberg said. But we are not defaulting our bonds.

With mounting sanctions potentially impeding Russia’s economy, Frydenberg said what the Russian government was ‘trying to do’ with its foreign reserves was ‘interesting’, but ultimately Australia would work smarter.

Frydenberg said that in recent days, the Russians were trying to reduce or sell their foreign reserves to transfer that into domestic currency in order to strengthen their domestic economy.

What the Russians have done is they’ve said to all Russian companies for them to sell their foreign reserves, their foreign currencies and transfer that into roubles, he said.

They’ve increased their policy rate – the equivalent of their cash rate – to 20 per cent. And that’s a doubling, a more than doubling, of what they had, he said.

They’ve closed their stock market, which had fallen by more than a third. Their stock market is not working and they have refused to pay coupons on their bonds, he said.

Australia has introduced tough sanctions on 350 individuals, and some key industries in lock-step with allies over the Ukrainian conflict.

Australia has also joined other western countries in pledging to remove some Russian banks from SWIFT, to ensure the banks are disconnected from the international financial system.