The United States is preparing to force Russia not to pay its international debts for the first time in a century in a coup against Vladimir Putin.
The Foreign Assets Control Service will allow the exemption, which allows Moscow to make payments on bonds, to be dropped, without the possibility of avoiding default, Bloomberg sources said.
The Kremlin insisted it would avoid a similar outcome on Wednesday, with Finance Minister Anton Siluanov saying he could still make payments in rubles.
Failure to meet its $ 20 billion international debt could put Russia on par with international credit markets for years to come, making it difficult for government and business to raise money.
This will be the first time the country has failed to make payments to foreign creditors since the Bolshevik revolution.
In late February, OFAC granted a temporary exemption, which allowed Russia to continue making payments to Western investors despite widespread sanctions.
It will expire on May 25, just two days before Moscow makes several bond payments.
Last week, Finance Minister Janet Yellen said the United States was “actively investigating” Russia’s compulsion to go bankrupt.
“We want to make sure we understand the potential consequences and spillover if we allow the license to expire,” she told senators.
Russia nearly avoided bankruptcy earlier this month by using its limited domestic foreign exchange reserves to cover $ 650 million in arrears on two bonds. She tried to make these payments in rubles, but this was rejected by international creditors.
Payments due on May 27 have different contractual terms, which means that this time it is possible to pay in rubles. But parts of an additional tranche due in June stipulate that dollars must be paid, so Russia’s fate seems to be decided if the United States decides to sanction the Kremlin further by blocking payments.
Mr Siluanov has vowed to sue the United States if Russia fails to make its payments.
Some Finance Ministry officials have argued that Russia should be allowed to continue making payments, forcing the Kremlin to drain its reserves. However, letting go of the exemption increases Moscow’s financial isolation.
Add Comment