War in Ukraine: the United States will introduce new sanctions against Russia
Steph Deschamps / April 5, 2022
Russia will no longer be allowed to pay its national debt from dollar accounts it holds at U.S. financial institutions. The U.S. Treasury imposed this new sanction on Russia because of its invasion of Ukraine.
The sanction is expected to force Russia to choose between three less attractive options, according to a ministry spokesman. Moscow can choose to pay the state's debts in dollars that it has in reserve in its own country, spend the new income immediately or become a bad payer. All these options weaken the Russian economy, is the idea behind this measure.
Although the West has already imposed various sanctions, including freezing reserves held by other central banks for the Russian central bank, Russia still has the necessary dollars. The main reason is that oil and gas supplies have been excluded from the sanctions. This could bring the Kremlin $321 billion this year.
If Russia has to use its own reserves to pay its national debts, it will not be able to support the value of the ruble. If oil and gas revenues are to be used to pay off government debts, the reserves will not be replenished as quickly. For example, Russia must also use these reserves to make purchases from friendly countries. If Russia stops paying its debts, friendly countries will also be less willing to do business with it.
So far, despite warnings from rating agencies, Russia has been content to make scheduled repayments and pay interest on government loans. Last Monday, another payment was required on a dollar loan that was once worth $2 billion. However, Russia managed to pay back three quarters of the loan in rubles first, so the dollar reserves had to be used only for the rest. Interest payments on Russian government loans in dollars and euros are not expected to resume until the end of May.