US Treasury Blocks Russian Debt Payments, Raising Concerns of Default

Source: Reuters

The United States prevented the Russian government on Monday from making payments of its sovereign debt of over $600 million from reserves held at US banks. RUBUSD down -0.86%

• The move seeks to intensify pressure on Moscow and eat into its holdings of dollars.
• Under sanctions imposed after Russia’s invasion of Ukraine on February 24, foreign currency reserves held by the Russian central bank in the US financial institutions were frozen.
• Meanwhile, the Treasury Department had been allowing the Russian government to utilize the funds to make coupon payments on dollar-denominated sovereign debt.
• On Monday, the US government decided to limit Moscow’s access to the frozen funds as the largest of the payments came due.
• An $84 million coupon payment was also due on Monday on a 2042 sovereign dollar bond.
• The move is meant to push Moscow to make the challenging decision of whether it would utilize its dollars on its debt or support its war efforts.