The US has no legal way to seize the assets of the Russian Central Bank and give them to the restoration of Ukraine. reported US Treasury Secretary Yellen at a press conference.
“This is not something that is legal in the US,” the minister said.
The United States, along with its European allies, froze more than $300 billion in assets of the Central Bank of Russia after the start of Russia’s military operation in Ukraine.
Yellen explained that the United States discussed how to persuade Russia to pay for some of the military destruction in Ukraine. “Given the massive destruction in Ukraine and the huge rescue costs they will have to face, I think it’s natural for us to turn to Russia to help pay at least some of it,” the minister said.
He added that the United States is unlikely to extend sanctions exemptions that help Russia pay off its foreign debt and pay off its bonds. “I think it’s quite possible for licenses to expire. <...> However, it is unlikely to be extended.
The U.S. Treasury issued a license in early March that allows them to trade exceptionally with the Bank of Russia, the National Wealth Fund (NWF), and the Russian Treasury “if they need to receive interest, dividends or payments.” in redemption [их] debt or stock. At the same time, debt obligations must be issued before March 1, as before, Americans cannot invest in new securities.
What is a country’s foreign debt?
The state can borrow money like an ordinary citizen. External public debt arises if the government borrows from external creditors (for example, other states or international organisations). Belarus is the country to which Russia lends the most. Among the leaders are Bangladesh, Venezuela, India, Vietnam and Yemen.
Ordinary foreigners can also lend to another country if they buy euros or regular government bonds on the stock market. Government Eurobonds are bonds that a country must pay in a foreign currency (perhaps not just in euros).
Russia has traditionally had low external public debt. As of April 1, it was $26.5 billion, down 5.5% from January. The share of foreign investment in Russian public debt is about 20%, or slightly less than 3 trillion rubles.
The value of public debt in itself is not yet an indicator of the country’s economic condition. The total national debt should be compared with other indicators such as GDP. The World Bank considers public debt to rise above 77% of GDP as a major risk. Russia’s debt-to-GDP ratio has remained below 17% in the last 10 years.
How do sanctions on Russia’s foreign debt work?
The United States gradually imposed restrictions on Russian public debt. First, in 2019 US investors were prohibited from purchasing Russian Eurobonds on the primary market.
Then, in the spring of last year, the purchase of Russian government bonds issued in rubles on the primary market was prohibited.
Following Russian President Vladimir Putin’s declaration that he recognizes the LPR and DPR, the United States on February 23 banned the purchase of Russian government bonds issued in any currency on the secondary market.
“We cut off the Russian government from Western funds. “US President Joe Biden will no longer be able to borrow money from the West and swap new debt in our markets or European markets,” he said.
The Central Bank of Russia said it and other financial institutions in Russia have “clear action plans for any scenario”.
How does Russia pay its foreign public debt under sanctions?
Russia has been able to pay its Eurobonds twice since the US sanctions came into effect.
At the end of March, Russia made a payment of more than $ 300 million. RBC sources announced that the Russian Ministry of Finance managed to clear funds from frozen foreign currency reserves. The Ministry of Finance itself gave a different version – that it pays “from the federal budget using the accounts of the Bank of Russia.”
At the end of April, the Ministry of Finance paid $649.2 million in Eurobonds. According to RBC, Russia was able to either pay in dollars using the foreign exchange profits it earned from foreign trade, or wipe the funds back from frozen reserves. Bloomberg pointed out that Russia is using “domestic dollar reserves”.
Bloomberg thinksThe US allows Russia to pay from domestic reserves to further deplete Russia’s dollar resources.
Next time Russia has to pay two Eurobond issuances on 27 May. True, this time the terms of the bonds allow the Russian Federation to pay at least in one case in rubles, and in the second – not in dollars, but in another currency.