U.S. considering move to block Russia's ability to pay

18/5/2022 6:01

        The United States is
        considering blocking Russia’s ability to pay its U.S.
        bondholders by allowing a key waiver to expire next week, a U.S.
        administration official said on Tuesday, which could put Moscow
        closer to the brink of default.
        
        Russia has so far managed to make its international bond
        payments despite Western sanctions, which have complicated the
        process of paying. The country has $40 billion of international
        bonds and last month made a late U-turn by making overdue bond
        payments to avoid default.
        
        Russia has not defaulted on its external debt since the
        aftermath of its 1917 revolution and was rated investment grade
        up until its Feb. 24 invasion of Ukraine.
        
        Now Russia has a looming May 25 deadline when a U.S. license
        allowing it to make payments is due to expire.
        
        Bloomberg News reported earlier on Tuesday that the Biden
        administration is poised to allow the waiver to expire as
        scheduled.
        
        "It's under consideration but I don't have a decision to
        preview at this time," the official told Reuters. "We are
        looking at all options to increase pressure on (Russian
        President Vladimir) Putin."
        
        Bloomberg said the administration has decided against
        extending the waiver as a way to maintain financial pressure on
        Moscow.
        
        Western sanctions introduced following Russia's invasion of
        Ukraine ban transactions with Russia's finance ministry, central
        bank or national wealth fund.
        
        The temporary general license 9A, issued by the Treasury
        Department's Office of Foreign Assets Control on March 2, had
        made an exception for the purposes of "the receipt of interest,
        dividend, or maturity payments in connection with debt or
        equity."
        
        That license has allowed Moscow to keep paying investors and
        avert default on its government debt, and allowed U.S. investors
        to continue to collect coupon payments.
        
        It expires on May 25, after which Russia will still have
        almost $2 billion worth of external sovereign bond payments to
        make before the end of the year.
        
        Some market participants had speculated that the Biden
        administration may extend the waiver, so as not to punish U.S.
        bondholders.
        
        The U.S. Treasury Department did not immediately respond to
        a request for comment.