The US Treasury will not allow payments on Russia’s public debt from accounts with US financial institutions to be made in dollars, limiting one of the strategies President Vladimir Putin has used to avoid default, an agency official said Tuesday.
Russia has until April 4 to make other payments on its public debt. The Kremlin must now choose between depleting its remaining valuable dollar reserves, seeking new revenue or not paying, added the official, who spoke on condition of anonymity because he was not authorized to speak officially.
The Treasury’s decision came after the agency said sanctions imposed on Russia for its invasion of Ukraine would still allow Russia to continue paying its dollar debt. These debts, among others, came from foreign investors and came from government investments aimed at stimulating economic growth in Russia.
Russia is currently experiencing skyrocketing inflation, shortages of essential goods and disrupted trade with the rest of the world as its invasion of Ukraine continues.
Although the ruble recovered from a slump after the United States and its European allies moved to punish Russia’s economy, Putin is using extreme financial measures to ease Western sanctions and inflate his currency.
Western sanctions for war include strict restrictions on banks and financial transactions with Russia. They also froze a large part of the Russian government’s foreign exchange reserves.
The West expelled major Russian banks from a system of financial transactions known as SWIFT, which is used daily to exchange billions of dollars between more than 11,000 banks and other financial institutions around the world.
It has also imposed sanctions on Russian authorities and oligarchs, as well as the country’s trade, natural resources and central bank.
The United States, European Union and Britain have limited the ability of Russia’s central bank to use more than 600,000 million dollars in foreign exchange reserves and have frozen its gold reserves. That leaves Russia’s central bank with few tools to shore up the ruble and keep it from losing value.
