Kremlin towers and Ivan the Great Cathedral in Moscow.
Kirill Kudryavtsev | AFP | Getty Images
The Biden administration will ban the Russian government from paying bondholders through U.S. banks starting Wednesday morning, the Treasury Department said.
This decision increases the chances that Russia will default on its outstanding debt.
This is the latest sanction against that country by the United States in response to Russia’s invasion of Ukraine.
The Biden administration since the invasion had granted a crucial exception to sanctions against Russia’s central bank, allowing that bank to process payments to bondholders through US and international banks.
But that exception will disappear at 12:01 a.m. ET on Wednesday, according to a bulletin issued by the Treasury Department titled “Notice on Russian Harmful Foreign Activity Penalties General License 9C.”
Research from JPMorgan Chase & Co. indicated that Russa faced nearly $400 million in payments due on dollar-denominated bonds on June 23 and 24, according to a Dow Jones report.
Timothy Ash, senior sovereign strategist at BlueBay Asset Management, told CNBC earlier this month that the Treasury’s Office of Foreign Assets Control, which administers economic and trade sanctions, “may act at any time to prevent institutions to process bond redemptions” by Russia. .
“OFAC can force Russia to default at any time. OFAC is always in control,” Ash said.