The Biden administration is planning to block Russian bond payments to American investors, a move that could push Moscow closer than ever to a historic debt default.
Russia has so far been able to pay its foreign debt obligations despite a raft of financial sanctions from the U.S. and its European allies over Moscow's behavior.
The Treasury Department's Office of Foreign Assets Control is considering letting a temporary exemption that allowed Russia to keep paying its debts lapse. The waiver, which expires on May 25, gave Moscow room to pay coupons, helping it avoid a historic default, according to Bloomberg, which first reported the news.
The Treasury Department didn't respond immediately to a FOX Business request for comment.
Russia has bond payments due on May 27 and June 24 that are collectively worth $500 million. The bonds' terms allow for a portion of that to be paid in other currencies than the dollar, according to Bloomberg.
Foreign Minister Anton Siluanov reiterated this week that Russia has no plan to default on its $20 billion of debt and is pledged to pay in rubles if transfers are blocked, according to Russian state media. Siluanov previously said Moscow would take legal action if its payments are blocked.
Siluanov told the pro-Kremlin Izvestia newspaper in April that they will sue because they undertook all necessary action so that investors would receive their payments. We will show the court proof of our payments to show the court our efforts to pay in rubles, just as we did in foreign currency. It won't be a simple process. Treasury officials had privately argued that allowing Russia to pay its debts would drain its resources and force it to allocate funds that would otherwise be spent on weapons and military operations in Ukraine. The White House wants to keep financial pressure on Russia.
Treasury Secretary Janet Yellen said last week that officials are still studying the economic consequences of allowing Russia to default on its debt.
This is something that we are actively examining right now, Yellen said at a Senate Banking Committee hearing. We want to make sure that we understand what the potential consequences of allowing the license to expire. After the Feb. 24 invasion of Ukraine, Western allies targeted Russia with severe financial penalties, including removing a key part of the Central Bank of Russia, which prevents it from selling dollars, euros and other foreign currency in its roughly $630 billion reserve stockpile, blocking certain financial institutions from the Swift messaging system for international payments, and sanctioning hundreds of Russian lawmakers and elites who have close ties to President Vladimir Putin.
After the invasion began, hundreds of Western companies - including Coca-Cola, McDonald's and Goldman Sachs - moved to sever ties with Moscow because they were under intense pressure from investors and consumers. The unrelenting fighting in Ukraine spawned a massive humanitarian crisis.