Treasury bars Russia payments in dollars from US accounts

Apr 5, 2022, 6:33 AM | Updated: 1:45 pm

WASHINGTON (AP) — The Treasury Department is moving to keep the Russian government from making debt payments at U.S. banks with U.S. dollars, restricting one of the strategies President Vladimir Putin is using to stave off default, an agency official said Tuesday.

Russia faces several April deadlines to make debt payments. The Kremlin must now choose between draining its remaining valuable dollar reserves, using new revenue coming in or default, said the official, who spoke on the condition of anonymity because the official wasn’t authorized to speak on the record.

The Treasury decision comes after the agency previously said sanctions levied on Russia over its invasion of Ukraine still permit Russia to continue to make debt payments. The debt is owed to foreign investors, among others, and comes from government investments to presumably spur economic growth in Russia.

Russia is currently facing skyrocketing inflation, shortages in essential goods and disrupted trade with the rest of the world as it continues its invasion of Ukraine.

While the ruble has bounced back from the fall it took after the U.S. and European allies moved to bury the Russian economy, Putin has resorted to extreme financial measures to blunt the West’s penalties and inflate his currency.

Western sanctions from the war have placed severe restrictions on banks and their financial transactions with Russia, and also have frozen much of the government’s reserves of foreign currency.

The West has cut key Russian banks out of a financial messaging system known as SWIFT, which is used every day to route billions of dollars among more than 11,000 banks and other financial institutions around the world. Sanctions have been issued on Russian leadership, oligarchs, trade and natural resources, and the country’s central bank.

The U.S., EU and United Kingdom have limited the ability of Russia’s central bank to draw on more than $600 billion in foreign currency reserves and have frozen its gold reserves. That has left the central bank with few tools to prop up the ruble and prevent it from crumbling in value.

The decision to limit bond payments will further deplete the resources Putin is using to continue his war against Ukraine and will cause more uncertainty and challenges for Russia’s financial system, the Treasury official said.

Darshak Dholakia, a trade and government regulations attorney in Washington, said now that Treasury has restricted access to these funds, “it seems like the calculus has changed.”

He said the U.S. is finding ways to ensure that Russia has less money to buy weapons by reducing its access to funds to pay for its bond obligations.

“The U.S. has not put full blocking measures on the central bank yet,” he said. “They’re saying that Russia can’t touch those funds unless it’s for an authorized purpose.”

Once a country defaults, it can be cut off from bond-market borrowing until the default is sorted out and investors regain confidence in the government’s ability and willingness to pay. Additionally, holders of the bonds could take serious losses and can sue.

Russia’s government can still borrow rubles at home, where it mostly relies on Russian banks to buy its bonds.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

FILE - The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen outside of...

Associated Press

Saudi Arabia reducing global oil supply, could spell higher prices for US drivers

Saudi Arabia will reduce how much oil it sends to the global economy, taking a unilateral step to prop up the sagging price of crude.

1 day ago

This photo provided by Robert Wilkes, owner of a house boat management company, shows smoke rising ...

Associated Press

Houseboats catch fire while docked at Wahweap Marina on Lake Powell

More than half a dozen house boats momentarily caught fire at a popular boating destination on the Utah-Arizona line on Friday.

3 days ago

File - Women work in a restaurant kitchen in Chicago, Thursday, March 23, 2023. On Friday, the U.S....

Associated Press

US hiring, unemployment jump in May and what that says about the economy

The nation’s employers stepped up their hiring in May, adding a robust 339,000 jobs, well above expectations.

3 days ago

(Pixabay Photo)...

Associated Press

Oath Keeper from Arizona sentenced for role in Jan. 6 riot at US Capitol

Edward Vallejo, a U.S. Army veteran from Phoenix, oversaw a “Quick Reaction Force” at a Virginia hotel that was prepared to deploy an arsenal of weapons into Washington if needed, authorities say.

4 days ago

FILE - U.S. Border Patrol Chief Raul Ortiz listens during a news conference, Jan. 5, 2023, in Washi...

Associated Press

US Border Patrol chief is retiring after seeing through end of Title 42 immigration restrictions

The head of the U.S. Border Patrol announced Tuesday that he was retiring, after seeing through a major policy shift that seeks to clamp down on illegal crossings at the U.S.-Mexico border following the end of Title 42 pandemic restrictions.

5 days ago

FILE - President Joe Biden talks with House Speaker Kevin McCarthy of Calif., on the House steps as...

Associated Press

House OKs debt ceiling bill to avoid default, sends Biden-McCarthy deal to Senate

The House approved a debt ceiling and budget cuts package late Wednesday, as President Joe Biden and Speaker Kevin McCarthy assembled a bipartisan coalition of centrist Democrats and Republicans against fierce conservative blowback and progressive dissent.

5 days ago

Sponsored Articles

...

DAY & NIGHT AIR CONDITIONING, HEATING AND PLUMBING

Here are the biggest tips to keep your AC bill low this summer

PHOENIX — In Arizona during the summer, having a working air conditioning unit is not just a pleasure, but a necessity. No one wants to walk from their sweltering car just to continue to be hot in their home. As the triple digits hit around the Valley and are here to stay, your AC bill […]

...

re:vitalize

Why drug-free weight loss still matters

Wanting to lose weight is a common goal for many people as they progress throughout life, but choosing between a holistic approach or to take medicine can be a tough decision.

(Desert Institute for Spine Care in Arizona Photo)...

Desert Institute for Spine Care in Arizona

5 common causes for chronic neck pain

Neck pain can debilitate one’s daily routine, yet 80% of people experience it in their lives and 20%-50% deal with it annually.

Treasury bars Russia payments in dollars from US accounts