U.S. banks and individuals will be prohibited from accepting bond payments from the Russian government after 12:01 a.m. NY time (04:01 GMT) on Wednesday.
Russia will move closer to default after the US Treasury Department said it would let a key sanctions waiver benefiting US investors expire.
U.S. banks and individuals will be barred from accepting bond payments from the Russian government after 12:01 a.m. New York time on Wednesday, when the permit-to-cash flow ends. The Treasury Department said in a statement on Tuesday.
“OFAC will not renew the terms” of the waiver “expiring on May 25, 2022 at 12:01 a.m. EDT,” the Treasury Department said in a statement posted from the Office of Water Assets Control. outside.
Treasury Secretary Janet Yellen last week said it was “reasonably likely” that her department would let the license expire, saying it was always considered a temporary measure.
The decision to continue to end the test indicates that the US would rather force Russia – which is under a series of sanctions related to its war in Ukraine – into default rather than allowing the country to drain. its assets for the benefit of American investors.
But while the change in US restrictions adds another hurdle to bond payments to foreign investors, it remains unclear whether this will be enough to get Russia over the edge. decide or not.
For one, bondholders outside of the US can still receive funds. And because most holders of Russian bonds are in Europe, there won’t be enough creditors to declare default, according to ITI Capital, one of Moscow’s largest brokerages. This threshold is typically the holder of 25% of the total outstanding bonds.
Russia is expected to pay about $100 million in foreign debt on Friday. Due to the expected expired vulnerability, it started transferring funds last week to bypass the new restrictions.
If payments are defaulted, Russia will have a grace period of up to 30 days to find a solution, as it did at the beginning of May, when it received the funds to investors at the last minute after the initial payments. head is blocked.
In total, Russia owes about $1 billion in coupon payments through 2022, but the country has plenty of cash, thanks to billions of dollars pouring in weekly from the sale of oil, gas and commodities. other.
Not all payments to Americans are prohibited after May 25. Under a license issued by the Treasury Department on April 7, US investors have until June 30 to exit. from Russian financial institution Alfa-Bank AO and until July 1 to divest from diamond company Alrosa PJSC.
The ruble – already at a four-year high – was little changed according to the Treasury announcement. The coin has had the best performer globally this year, up about 30% against the dollar.
(Add report from Treasury in third paragraph, exception to deadline in second to last paragraph.)
–With support from Carolina Wilson.