UPDATE 1-Russia to service external debt in roubles, ministry says

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May 25 (Reuters) - Russia will service its external debt in roubles, which can be converted into the currency of the original Eurobonds at a later date, the finance ministry said on Wednesday, as a key U.S. waiver allowing Moscow to pay on its foreign debt has expired.

The U.S. Treasury Department allowed a waiver to expire at 12:01 am ET (0401 GMT) on Wednesday, blocking Russia from making interest and maturity payments on its sovereign debt to U.S. persons.

"The decision... primarily infringes on the rights of the foreign investors in the Russian debt instruments and undermines confidence in Western financial infrastructure," the finance ministry said in a statement.

Last week, Russia had rushed forward payments on two international bonds - one denominated in euros and one in dollars - ahead of the May 27 settlement date and as the waiver was set to expire.

Almost $2 billion worth of payments on Russian international bonds fall due before year-end. The ministry reiterated on Wednesday it would continue to service its external obligations but in roubles, which could be converted into the original bond currency later on via the National Settlement Depository (NSD).

"Payments using foreign financial intermediaries will be made on the C-type accounts of those financial intermediaries... with an option to restore an access to those funds for investors which submitted written proven rights for such payments in the future," the finance ministry said.

Moscow has temporarily banned foreign investors from countries which supported sanctions against it from selling their assets held inside Russia and from receiving payments on domestic rouble bonds, until sanctions are lifted.

Coupon payments on sovereign debt instruments are being made on special C-type accounts at the NSD and kept there until after Western sanctions and Moscow's counter measures are lifted. The NSD did not immediately reply to a Reuters request for a comment.

"The current situation has nothing in common with (the default) of 1998 when Russia was lacking funds to service its debts. Today there is cash and willingness to pay," the Finance Minister Anton Siluanov said in the statement. (Reporting by Reuters; Editing by Kevin Liffey and Tomasz Janowski)