Expiration of the deadline for payment of Russian American bonds

The United States is expected to let Russia’s debt payment license expire today, which could bring Moscow closer to default.

Today is the deadline for Russian payment of US bonds. Photo: Maxim Shemetov/Reuters

The United States is expected to let Russia’s debt payment license expire today, potentially bringing Moscow one step closer to defaulting on its debt.

Russia has not waived its foreign debt for more than a century. Since the Ukrainian invasion, the country has managed to make its international obligation payments despite Western sanctions prohibiting transactions with Russia’s finance ministry, central bank or national wealth fund.

If the United States lets the license expire, Russia will struggle to make bond payments due on June 24. The country is expected to have nearly $2 billion in external sovereign payments to make before the end of the year.

The US Treasury Department determined that letting the license expire would not pose a serious threat to the stability of the financial system, as most Russian bondholders are in Europe. Moreover, opponents of the decision, mostly American investors, worry about the harm they will suffer, and many have argued that extending the exemption would likely encourage Russia to dip into its funds to pay off its debt. . Despite opposition, the move is likely to happen as investors have had ample time to adjust to Moscow’s exclusion from the global financial system.

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Elaine R. Knight