US pushes Russia towards default by blocking debt payments: Official

A former US sanctions official says the United States is pushing Russia toward default by blocking debt payments, as Washington ups the ante in its economic warfare against Moscow over the conflict with Ukraine.

The US Treasury Department on Tuesday announced it would no longer allow Russia to make debt payments owed to American bondholders, The Washington Post reported.

Moscow has so far successfully managed to make its international bond payments despite the US-led sanctions that have hindered the process though.

Russia has not defaulted on its external debt for more than 100 years. It has several billions of international bonds and last month made overdue bond payments to avoid default.

However, Russia was facing a May 25 deadline when a US license allowing it to make payments is set to expire.

The Treasury move will make it almost impossible for Russia to avoid a default on May 25 when a US license allowing it to make payments is set to expire.

The Russian government owes a total of about $20 billion worth of bonds, mostly in dollars, and it owes about $500 million in interest payments over the next month, according to Gerard DiPippo, a senior fellow with the economics program at the Center for Strategic and International Studies.

“This will make the likelihood of a default now significant,” said Adam Smith, a partner at Gibson Dunn and a former Obama administration sanctions official. “We’ve never done this to an economy like this before.”

The Biden administration had decided last week against extending the waiver in order to increase financial pressure on Moscow.

Western countries have imposed unprecedented sanctions on Russia since President Vladimir Putin declared a military operation in Ukraine on February 24.

ME