Russia claims to have fulfilled crucial interest payments on two dollar-denominated eurobonds, which may have averted a historic debt default.
Russia's Finance Ministry said Friday that the London branch of paying agent Citi had received $117 million in total payments. The U.S. bank processes payments for bondholders.
It was not clear if Russia would have been able to meet its external debt obligations following the economic sanctions.
The U.S. and international allies have tried to cut off Moscow from the global financial system by blocking most of its gold and foreign exchange reserves.
The Kremlin had until the end of business on Wednesday to pay interest on two eurobonds. The first foreign currency debt default in more than a century could have been avoided if these payments had been made.
According to the Wall Street Journal, the funds were received well within the 30-day grace period under the terms of the bonds, despite the fact that coupon payments arrived a day later than expected.
Russia had the funds necessary to fulfill its external debt obligations, according to the Kremlin.
Moscow's ability to repay its international debt is likely to be tested again, as Russia seems to have been able to meet its coupon payment obligations in full on this occasion.
Russia's ability to service foreign debt payments is likely to be affected by the upcoming end of an exemption granted under U.S. sanctions.
Russia's Ministry of Finance was unsure how it would approach the payment in light of targeted measures on the Central Bank of Russia that rendered much of its foreign exchange reserves inaccessible, prompting a slew of credit downgrades from the major global ratings agencies.
The Central Bank of Russia asked the biggest U.S. bank by assets to process $117 million in coupon payments on their bonds. After consultation with the U.S. Treasury Department, the payment was transferred to Citi in London.
When contacted by CNBC on Friday morning, a Treasury Department spokesman was not available.
Neither JP Morgan Chase nor Citi would comment.
As a paying agent to Russia's foreign bondholders, Citi was responsible for the administrative role of receiving and processing payments to a security holder on behalf of the issuer. It isn't usually allowed to reveal confidential and financial information.
The payment was described by Tim Ash, senior emerging markets strategist at BlueBay Asset Management.
The OFAC enforces economic sanctions based on U.S. foreign policy objectives.
TheOFAC is bailing out Western bondholders who should have known better, and taking money from a potential Ukraine reparation fund, Ash said via email Friday.
The U.S. Treasury has said that sanctions against Russia do not prevent the country from making its international debt payments.
Russia's foreign and local currency credit ratings were lowered by S&P on Thursday.
Although public statements by the Russian Ministry of Finance suggest to us that the government currently still attempts to transfer the payment to the bondholders, we think that debt service payments on Russia's Eurobonds due in the next few weeks may face similar technical issues.
The St. Basil Cathedral and a Kremlin tower are visible on the Red Square in Moscow.If Moscow fails to meet its external debt obligations in the coming weeks, S&P said it could lower Russia's foreign issuer credit ratings even further.
Russia's ability to service its debt obligations may be affected by the scheduled expiration of OFAC's license for payments on May 25.
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