The US Treasury Department led by Janet Yellen allowed a license to expire on Wednesday that permitted Russia to keep paying its debtholders through American banks.

The license applied to American investors and international investors who have dollar-denominated debt or bonds.

The Russian Finance Ministry said it will pay in roubles and offer "the opportunity for subsequent conversion into the original currency." The ministry didn't give a timeframe for that to happen.

Russia has not defaulted on its international debts since the 1917 Bolshevik Revolution, when the Russian Empire collapsed and the Soviet Union was created.

Russia defaulted on its domestic debts in the late 1990s during the Asian financial crisis but was able to recover from that default with the help of international aid.

"The current situation has nothing whatsoever in common with the situation in 1998, when Russia did not have enough means to cover its debts," Finance Minister Anton Siluanov said in a statement.

"Now there is money and there is also the readiness to pay. This situation, artificially created by an unfriendly country, will not have any effect on Russians' quality of life."

Also on Wednesday, President Vladimir Putin ordered 10 per cent rises in pensions and the minimum wage to cushion Russians from inflation, but denied the country's economic problems were all linked to the war in Ukraine.

With annual inflation near 18 per cent last month, the Kremlin leader acknowledged that 2011 would be a "difficult" year for the Russian economy.

with Reuters

Australian Associated Press