Arab Press

بالشعب و للشعب
Friday, Apr 26, 2024

US Treasury blocks Russian bond payments, raising risk of default

US Treasury blocks Russian bond payments, raising risk of default

The decision further complicates Russia’s attempts to keep meeting debt obligations amid the sanctions imposed after it invaded Ukraine.

Russia’s efforts to avoid a sovereign default took another blow after the U.S. Treasury halted dollar debt payments from the country’s accounts at U.S. banks.

The decision further complicates Russia’s attempts to keep meeting debt obligations amid the sanctions imposed after it invaded Ukraine. As the government tries to sidestep its first external default in about a century, those restrictions have hampered and delayed the process of transferring money to bond holders.

Other governments are also planning tougher sanctions after allegations that Russian troops massacred civilians in Bucha and other Ukrainian towns. The European Union is proposing to ban coal imports from Russia, which would be a major step-up for a region that’s so far shied away from targeting energy flows crucial to the bloc’s economy.

The U.S. announcement is intended to force Russia into either draining its domestic dollar reserves or spending new revenue to make bond payments, or else go into default, according to a spokesperson for the Treasury’s Office of Foreign Assets Control, who discussed details on condition of anonymity.

“Clearly this latest announcement by the U.S. Treasury is designed to put additional pressure on the Russians,” said Gary Kirk, a portfolio manager at TwentyFour Asset Management. “The alternative payment methods are significantly more punitive and more challenging for Russia and hence it does increase the chances of a technical default.”

Despite warnings from credit-rating companies and others, Putin’s government has so far stayed current on its foreign debt obligations.

But the sweeping sanctions have already led to the seizure of an estimated two-thirds of Russia’s reserves. The central bank says it’s also sold some of its foreign currencies to support the ruble, leaving questions on how long it can pull from its local coffers to pay its debts.

Russia’s foreign-currency and gold reserves were about $604 billion as of March 25, down $38.8 billion from a February peak. Still, it’s reaping in huge sums from exports of energy. Bloomberg Economics expects it will earn nearly $321 billion this year if the commodities continue flowing.


But even with the funds, payments haven’t been smooth, with many delayed by banks doing lengthy checks to ensure they aren’t breaching sanctions.

A once-$2 billion dollar bond that matured Monday served as the most recent stress test, though Russia was able to buy back about three-quarters of the outstanding amount in rubles before the note came due. The latest U.S. move will intensify scrutiny on its ability to pay back the remainder of that debt.

Additionally, coupon payments due Monday on a 2042 bond had yet to reach some investor accounts as of Tuesday morning in London, according to bondholders who declined to be named because they are not authorized to speak publicly.

Russia’s dollar bonds, which were already trading well into distressed territory, fell on Tuesday. The 2042 declined 7 points to about 28 cents on the dollar, according to CBBT pricing.

The U.S. announcement “increases the risk of default, not because of lack of money,” said Lutz Roehmeyer, chief investment officer at Berlin-based Capitulum Asset Management. “The new sanction will cause technical issues with regard to the settlement systems, so it is now an open question how Russia will construct the payment routes.”

Newsletter

Related Articles

Arab Press
0:00
0:00
Close
China Criticizes US for Vetoing UN Ceasefire Resolution in Gaza
Saudi Arabia ranks first in UN index for e-government services in MENA
Israel Records 20% Drop In GDP, War In Gaza Is The Reason
Saudi Arabia's FDI Inflows Grow with New International Standards
Venture Capitals Power Up Across MENA Region
PM Modi Announces Opening Of New CBSE Office In Dubai
January Funding for MENA Startups Totals $86.5 Million
Saudi Arabia accelerates digital economy growth through Nvidia partnership
Israel unveils tunnels underneath Gaza City headquarters of UN agency for Palestinian refugees
Israel deploys new military AI in Gaza war
Egypt threatens to suspend key peace treaty if Israel pushes into Gaza border town, officials say
Saudi Arabia Warns Of A "Humanitarian Catastrophe" If Israel Moves On Rafah
US University To Shut Qatar Campus Due To "Heightened Mideast Instability"
Facebook and Instagram Ban Iran's Supreme Leader
Defense Technology Showcase Held in Riyadh
Saudi Arabia’s non-oil exports rise 2.5% to $6bn in November 2023: GASTAT
Rolls-Royce Executive Encourages Saudi Women to Tap into Their Inner 'Superhero' for Success in Defense Industry
Saudi Arabia launches National Academy of Vehicles and Cars
Saudi Tourism Minister Reveals Plan for 250,000 New Hotel Rooms by 2030
SAR to more than double eastern network passenger capacity with new trains deal
Saudi Arabia Enhances National Defense with New Partnerships
Saudi Aramco Maintains Arab Light Crude Pricing to Asia for March
NEOM Establishes New York Office to Support Investors
Saudi Wealth Fund Draws in Over $25 Billion Worth of Investments in Three Years, Al-Rumayyan Reveals
The Saudi Kingdom's Ultimatum to Israel: A Win-Win Peace with Saudi Arabia and the Arab World, or a Lose-Lose Continued Occupation and Endless Conflict
Biden condemns anti-Arab hate after WSJ opinion piece calls Dearborn ‘jihad capital’
Turkey Releases Seven Hostages Captured by Pro-Gaza Gunman
Arab Parliament Commends Women's Contributions to Societal Development
British and Hungarian Foreign Ministers visited Lebanese leaders to stress the importance of enacting UN Resolution 1701
Yemen's Houthis Say They Targeted British Merchant Vessel In Red Sea
Donald Trump Nominated for Nobel Peace Prize for 'Historic' Middle East Policy
US lawmakers approve F-16 jet sale to Turkey following NATO expansion support
Saudi Arabia Climbs 25 Places in World Bank's National Statistics Indicator
Tourism Growth in Saudi Arabia Fuels Advancements in the Hospitality Industry," Says Rotana Official
Houthi Rebels Request Departure of UN Staff from Yemen, Including US and UK Personnel, within a Month
Modi Inaugurates Hindu Temple on Site of Demolished Mosque in India
Over 25,000 Deaths in Gaza Amid Israeli Offensive
Escalating Clashes in Gaza as Israel Distributes Leaflets to Assist in Locating Hostages
Turkey's First Astronaut Set to Launch for International Space Station Today
Head of Palestinian Investment Fund Warns More People May Die of Hunger Than War in Gaza
Palestinian Envoy Criticizes UK for Alleged 'Double Standards' in Policies Toward Israel
Morocco to Lead UN Human Rights Council in 2024
Is artificial intelligence the solution to cyber security threats?
Egypt has been identified as the leading military force among Arab nations and ranks 15th globally
The AI Revolution in the Workforce: CEOs at Davos Predict Major Job Cuts in 2024
Iranian Nobel Laureate Narges Mohammadi Receives Additional Prison Sentence
"Gazans Urge Israeli Forces to Target Hamas in Leaked Audio"
Biden States US and UK Airstrikes on Houthis Were a 'Defensive Action
Large Pro-Palestine Rally in London as Gaza Conflict Hits Day 100
South Africa Urges World Court to Halt Israeli Actions in Gaza
×