The move by US authorities threatens to end a period of invasion of Ukraine almost six weeks ago, during which Moscow continued to pay its bonds in dollars, confusing many investors’ expectations that Western sanctions and controls Russian currency will lead the country. in the first state bankruptcy since 1998. “The US Treasury Department will not allow dollar debt payments to be made from Russian government accounts to US financial institutions. “Russia has to choose between depleting the remaining valuable dollar reserves or new revenue or default,” a US Treasury Department spokesman said late Monday. Russian dollar bond prices, which had recovered somewhat from the recession after the invasion, fell on Tuesday. A 2028 bond traded at 34 cents against the dollar, up from 42 cents on Monday. Although the Treasury Department apparently left the door open to resume payments using dollars that had not been frozen by sanctions, investors said they thought it would be “technically difficult” for cash to reach Western bondholders. JPMorgan, the US correspondent bank that has processed five foreign currency payments on Russian bonds since Moscow’s invasion of Ukraine, refused to make two further payments on Monday after seeking guidance from US authorities, a source said. knows the subject. Moscow was to make a $ 84 million coupon payment and a $ 552 million repayment of a maturing bond, and has a 30-day grace period to bring cash to investors before defaulting. It ‘s hard to see how [Russian finance ministry] can make payments to US bondholders in dollars according to the original documentation, as US banks are the settlement / clearing agent and it is difficult to see that Russia can technically introduce dollars into the system to facilitate payment, “said Timothy Ash, an economist at BlueBay Asset Management. JPMorgan declined to comment. The move comes as the US and Western allies seek new ways to bolster their sanctions on Moscow in the wake of the ongoing war against Ukraine and increasingly brutal military tactics.

The United States and its allies imposed a series of harsh economic sanctions on Russia in late February, but are trying to find ways to further strengthen them and prevent Russia from bypassing them. “Russia is facing a recession, soaring inflation, shortages of basic goods and a currency that no longer works in much of the world,” said a spokesman for the US Treasury Department. “This will further deplete the resources [Russian president Vladimir] “Putin is using it to continue his war against Ukraine and will cause more uncertainty and challenges in their financial system.” Even if Russia can avoid bankruptcy by finding a way to make payments that expire on Monday, it faces a further hurdle in servicing its debts after May 25, when the US sanctions waiver on U.S. investors expires. to receive Russian interest payments.