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The Treasury Department on Monday blocked the Russian government from making sovereign debt payments using dollars held at American banks, a move that greatly ramps up financial pressure on Russia by depleting its dollar reserves and brings the country closer to a potential default—which would have dire consequences.


While the Treasury had already frozen Russian government assets held at US institutions under sanctions put in place after the invasion of Ukraine, it had still been allowing use of those funds to make payments on sovereign debt.

As of Monday, however, the Treasury announced it will no longer allow Russia to access those dollars as it tries to meet sovereign debt obligations to bondholders.

Russia had over $600 million in combined bond payments due on Monday, which is when the department decided to fully block Moscow’s access to frozen funds, according to the Treasury.

The move will “further deplete the resources Putin is using to continue his war” and forces his government to choose whether to use its own dollar holdings to make debt payments or use the money elsewhere, such as for the war effort in Ukraine, Treasury officials said.

It also greatly increases the risk of a potential default, as Moscow will now be forced to use alternative sources of funding to pay bond investors: While Russia has so far been making its payments, that will likely become increasingly complicated by heavy economic sanctions from the West.

If Russia does default, that will likely drive its last few remaining foreign investors out of the country, further devalue the ruble and Russian companies could follow the government in defaulting on their obligations.