The United States has blocked the Russian government from paying more than $ 600 million to its sovereign debtors.
Reuters – The Russian government on Monday blocked the payment of more than $ 600 million in reserves held by US banks to its sovereign debtors in a bid to increase pressure on Moscow.
Russia’s central bank’s foreign currency reserves with US financial institutions have been frozen under sanctions imposed after Russia launched a military operation in Ukraine on February 24.
But the Treasury Department personally allowed the Russian government to use the funds to pay off sovereign debt in dollars.
On Monday, the U.S. government decided to cut off Moscow’s access to frozen funds as the largest payments matured, including $ 552.4 million in principal, according to a U.S. Treasury spokesman. Another payment of over $ 80 million was blocked.
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The spokesman said the move was aimed at forcing Moscow to make the difficult decision to use the accessible dollars for other purposes, including repaying the debt or supporting its war efforts. Russia faces a historic default if it does not want to. “Russia has to choose between remaining valuable dollar reserves or new revenue outflows or debt repayments,” a U.S. Treasury spokesman said.
JPMorgan Chase & Co (JPM.N), which until now had been a reporter’s bank, had been stopped by the treasury, a source familiar with the matter said.
Reporter Bank pays bonds from Russia and sends them to a payment agent for distribution to securities abroad.
The country has 30 days to pay, the source said.
There has been growing pressure this week as the US and Europe plan new sanctions to punish Moscow for allegedly killing civilians in Ukraine.
With $ 40 billion in face value and a total of 15 international bonds outstanding, Russia has so far managed to avoid repaying its international debt in defiance of unprecedented Western sanctions. But the task is getting harder.
While Russia has no access to international lending markets due to Western sanctions, a default ban will apply to lenders until they are fully repaid and legal issues arising out of default are resolved.
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