Investors were on pins and needles as coupon payments to international holders of Russian debt obligations tied to sanctioned oligarchs hit a snag due to Western sanctions prompted by Moscow’s invasion of Ukraine.

According to a source close to the company, Severstal, whose primary shareholder, Alexey Mordashov, was sanctioned by the European Union on Feb. 28, is having problems paying its debt holders.

The coupon payment due March 21 was settled with the paying agent after it was temporarily blocked by a Western correspondent bank, according to Evraz, the Russian steelmaker whose biggest shareholder is sanctioned Russian Roman Abramovich.

EuroChem, a fertiliser manufacturer, had trouble making a coupon payment due on March 14 after being barred by the paying agent, according to Bloomberg last week. After being sanctioned by the EU, the company announced on March 16 that Vladimir Rashevskiy had resigned as chief executive officer and from the board of directors, effective March 15.

The difficulties faced by these companies demonstrate how harsh Western sanctions implemented in response to Russia’s invasion are having a widespread impact, as banks become wary of breaking the regulations.

International investors are scrutinising Russia’s sovereign debt payments, which it describes as a “special military operation.”

Coupons due on dollar-denominated bonds, on the other hand, seemed to have been cleared by intermediate institutions under a temporary licence given by the US Treasury Department and the Foreign Assets Control Office (OFAC).

A bondholder reported Monday that Russia’s coupon payment on a government bond due in 2029 was received, marking the second occasion in recent days that the country appears to have avoided default.

Assets and businesses related to wealthy Russian businessmen thought to be close to President Vladimir Putin are being scrutinised more closely, as a number of them have been sanctioned by the West.

According to JPMorgan data, Russian corporations have roughly $100 billion in hard currency bonds outstanding, more than twice the $40 billion the Russian government owes on international bond markets.

More than half of all existing corporate bonds were issued by quasi-sovereigns or state owned enterprises, with an emphasis on oil and gas businesses.

According to a source close to Severstal, Citigroup Inc (C.N) has neglected to process a “test” payment submitted last week for its coupon on 2024 loan participation notes (LPN), despite the grace period expiring on Wednesday.

In the event that the test – 1 percent of the coupon – is not processed, Severstal announced on March 16 that it will look into other possibilities for delivering the $12.6 million coupon payment. However, it has yet to release any other information.

Citi and Severstal both declined to comment on the source’s disclosure to the media.

Evraz encountered similar difficulties, with the business announcing on Monday that the correspondent bank had “blocked for compliance” a coupon payment of roughly $19 million. The problem, according to the corporation, is tied to sanctions.

It announced on Tuesday that the relevant account had been settled by the payment agent.

(Adapted from USNews.com)

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