The US may block Russia’s ability to make payments on its government debt by the end of May, Bloomberg reported on Tuesday citing people familiar with the matter.
According to the publication, in order to boost financial pressure on Moscow, the US Treasury Department’s Office of Foreign Assets Control is poised to scrap a temporary exemption on Russia’s debt payments once it expires on May 25. The waiver was granted after Washington introduced sanctions on Russia in response to the launch of a military operation in neighboring Ukraine, which was highly criticized in the US. This allowed Moscow to make coupon payments even when nearly all other financial transactions were banned. Scrapping the exemption would effectively put a block on Russian payments to US investors.
Moscow’s inability to meet its debt obligations could be viewed as a default, analysts say, albeit an “artificial” one, as the country remains financially capable of paying but would be prevented by sanctions from doing so.