US News: US blocks Russia’s access to dollars, heightening default risk

The United States has begun barring Russia from making loan payments using dollars held in US banks, a move designed to deplete its international currency reserves and potentially give Russia a Pushes towards its first foreign currency loan default in a century.

A Treasury Department spokesman said the action was taken on Monday. It was the same day that more than $500 million in Russian sovereign debt payments were paid off. The new sanctions, the spokesman said, allow Russia to choose between decimating remaining dollar reserves in Russia or using new revenues (for example from natural gas payments) to make bond payments to avoid defaulting on its debt. intended to force.

Since Russia invaded Ukraine in late February and sanctions were imposed, the Russian government has continued to make its foreign currency debt payments. Although it has shown a willingness to pay, it has been able to pay investors using US banks with the approval of the US government. Last month, the Treasury Department created an exemption from its sanctions that allowed Americans to accept loan payments from Russia until May 25 to avoid destabilizing the broader financial system.

On Monday, a $2 billion bond as well as a coupon payment of $84 million arrived. But last week, Russia bought back about three-quarters of the bonds maturing on Monday in exchange for the ruble. This was a relatively unusual move but reduced Russia’s dollar obligations, leaving about $552 million to be paid. Treasury action on Monday blocked these payments, but Russia has a 30-day grace period to complete it before the transaction is found to be in default.

Russia has confused many hopes that after the war broke out in Ukraine and the United States and Europe, barring access to a large portion of its foreign exchange reserves, after imposing sanctions on its central bank, it would face imminent default. was at risk. But Russia has continued to pay and has continued to replenish some of its reserves using money from energy exports.

A Treasury spokesman said the action this week would pose additional challenges to Russia’s financial system. The Russian government has already implemented capital controls restricting the flow of money in and out of the country.

This article is originally from . appeared in
the new York Times,

Originally published at Pen 18