AP

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

A woman pauses while shopping at a Kohl's store in Clifton, N.J., Jan. 26, 2024. On Thursday, Feb. ...

Associated Press

Federal Reserve’s preferred inflation gauge picked up last month in sign of still-elevated prices

An inflation gauge favored by the Federal Reserve increased in January, the latest sign that the slowdown in U.S. consumer price increases is occurring unevenly from month to month.

13 hours ago

This undated image provided by Mikel Desmond shows his brother Marcus Tessier, who turned up in Dem...

Associated Press

Missing teen with autism found in New Mexico, about 200 miles away from his Arizona home

A missing teen with autism has been found in New Mexico — about 200 miles away from his home in southern Arizona.

14 hours ago

A newly released report on last year’s fatal crash involving a pickup truck and a group of bicycl...

Associated Press

Report suggests steering of vehicle that caused fatal Goodyear bicycle crash worked fine

A new report on last year’s fatal Goodyear bicycle crash has cast doubts about the driver’s claim the vehicle’s steering locked up.

2 days ago

Israeli Embassy...

Associated Press

US airman dies after setting himself ablaze outside Israeli Embassy in Israel-Hamas war protest

An active-duty member of the U.S. Air Force has died after he set himself ablaze outside the Israeli Embassy in Washington, D.C.

4 days ago

Biden and Trump to visit Mexico border Thursday immigration...

Associated Press

Biden and Trump both plan trips to the Mexico border Thursday, dueling for advantage on immigration

President Joe Biden and former President Donald Trump will make dueling trips to the U.S-Mexico border on Thursday.

4 days ago

Arizona and New York attorneys feud over extraditing suspect...

Associated Press

Why Alvin Bragg and Rachel Mitchell are fighting over extraditing suspect in New York hotel killing

Maricopa County Attorney Rachel Mitchell says she isn't into extraditing a suspect due to her lack of faith in Manhattan’s top prosecutor.

8 days ago

Sponsored Articles

...

Day & Night Air Conditioning, Heating and Plumbing

Valley residents should be mindful of plumbing ahead of holidays

With Halloween in the rear-view and more holidays coming up, Day & Night recommends that Valley residents prepare accordingly.

...

Sanderson Ford

The best ways to honor our heroes on Veterans Day and give back to the community

Veterans Day is fast approaching and there's no better way to support our veterans than to donate to the Military Assistance Mission.

...

Canvas Annuity

Interest rates may have peaked. Should you buy a CD, high-yield savings account, or a fixed annuity?

Interest rates are the highest they’ve been in decades, and it looks like the Fed has paused hikes. This may be the best time to lock in rates for long-term, low-risk financial products like fixed annuities.

Treasury bars Russia payments in dollars from US accounts