The US Treasury Department’s Office of Foreign Assets Control has decided not to renew a license that allows Russia to make external debt service payments. About it says in a notice on the Ministry’s website. The license was valid until May 25.
This means that for the first time in more than a century, Russia is likely to default on its public external debt.
The decision not to renew the license was made by the US Department of the Treasury after analyzing the possible economic consequences of such a move. Experts have come to the conclusion that they will be minimal. More importantly, the symbolic meaning of this step, which was taken as part of earlier sanctions against Russia for invading Ukraine.
Earlier, on May 18, Russian Finance Minister Anton Siluanov once again announced his intention to pay the state external debt in rubles, if the license that allows servicing it in dollars is not renewed. Earlier, Russia has already tried to make payments in rubles, to which the holders of Russian securities did not agree.
After May 25 and until the end of 2022, Russia will need to pay nearly $2 billion in external sovereign bonds, according to Bloomberg. Next payouts scheduled for June 23-24. If they fail, a formal default may await Russia at the end of July.
Moscow threatened to take legal action in an attempt to prevent a default.
Sanctions imposed by the West after Russia’s invasion of Ukraine prohibit transactions with the Russian Ministry of Finance, the Central Bank or the National Welfare Fund (NWF).