The United States on Monday stopped Russia from paying holders of its sovereign debt more than $600 million from frozen reserves held at US banks, saying Moscow had to choose between draining its dollar reserves at home and default.
Moscow has managed to make a number of foreign exchange coupon payments on some of its 15 international bonds with a face value of around $40 billion outstanding before the United States stopped such transactions. Russia's ability to fulfil its debt obligations is in focus after sweeping sanctions in response to what Moscow calls"a special military operation" in Ukraine have frozen nearly half of its reserves and limited access to global payment systems.JP Morgan, which had been processing payments on Russian sovereign bonds as a correspondent bank, was stopped by the US Treasury from doing for the two payments due on Monday, a source familiar with the situation said.
Russia has a 30-day grace period to make the dollar payment, but if the cash does not show up in bondholders account within that time frame it would constitute a default, global rating agencies have said.