Cancellation of a license
The article notes that the United States Treasury revoked a general license that had allowed Moscow to make debt payments on sovereign bonds without triggering certain anti-Russian sanctions. This license expires on May 25, ending a window that enabled Russia to settle some bond obligations.
Analysts describe the license ending as potentially a turning point in Russia’s long debt saga, especially after almost three months of conflict in Ukraine. To date, Moscow has managed every creditor payment and has navigated a sanctions environment that blocked some pathways for international transfers.
Insiders familiar with the matter say some US Treasury officials privately argue that allowing Russia to honor its debts could drain the treasury further and divert funds that might otherwise support military operations in Ukraine.
Nevertheless, the article indicates that the administration chose not to renew the license to maintain financial pressure on Moscow, while another source cautions that the Ministry of Finance has not yet reached a final decision.
In this context, the writers add that the impact of bond payments on Russia’s finances would likely be small compared with the revenue the country earns weekly from oil, gas, and other exports.
Bloomberg reported that Moscow’s upcoming debt payments are scheduled for May 27, covering foreign bonds maturing in 2026 and 2036. The initial issue is in dollars, with allowances for payments in euros, Swiss francs, or pounds, and interest routed to accounts in Switzerland, the United Kingdom, or the European Union. A second euro-denominated issuance, due in 2036, includes a clause permitting ruble payments as well.
All told, by the end of June Russia faced outstanding obligations to bondholders totaling more than $490 million.
Officials cited in the report argue that the United States decision reduces the chance that American investors could recover funds from Moscow, though this alone might not prevent Russia from facing tighter restrictions.
general license
Reuters reported a separate unnamed US official suggesting that the extension of the general license remains under assessment.
One source noted that the options being considered aim to maintain pressure on President Vladimir Putin, underscoring the broader strategy of sanction enforcement.
Earlier in March, it became known that the US Treasury issued a license allowing investors to receive debt payments on Russia’s sovereign Eurobonds.
Subsequently, as a special exception, transactions were permitted to receive interest, dividends, or repayments related to the debt or shares of the Central Bank of Russia, the National Welfare Fund, and the Ministry of Finance. Debt obligations must have been issued before March 1, 2022, with Americans restricted from purchasing new securities.
Further explanations from the Treasury indicated that after May 25, US residents would need individual permits to receive interest or principal payments on Russian sovereign Eurobonds.
Following Moscow’s military operation in Ukraine and the resulting sanctions by the US, EU, and allies, roughly half of Russia’s international reserve assets were blocked. The US also barred using frozen dollar reserves to settle foreign debt as of April 4, prompting the Russian Ministry of Finance to make a debt payment in rubles for the first time.
In early April, White House spokespeople argued that sanctions force Russia to choose between depleting foreign currency reserves and defaulting on debts. The message conveyed that Russia faces a difficult trade-off, with sanctions bringing the financial system close to a breaking point.
In response, Russia’s Ministry of Finance rejected the notion that the United States could artificially block payments in foreign currency, while the central bank head, Elvira Nabiullina, asserted that the country possesses sufficient resources and that a default is not imminent.