Russia-Ukraine war: US to stop Russia's dollar debt payments to tighten sanctions

The United States and its Western allies are looking for ways to tighten sanctions against Russia in the wake of the ongoing war in Ukraine, prompting the US to halt Russia's dollar debt payment. The US Treasury announced that Russia's ability to make payments in dollars through US institutions would be suspended. A US Treasury spokesperson stated that the US Treasury would prohibit all dollar debt payments from Russian government accounts held in US financial institutions from Monday. This comes after Russian troops were accused of slaughtering residents in Bucha and other Ukrainian towns over the weekend.

The spokesperson also stated that the move is intended to force Russia to choose between three unpalatable options: draining dollar reserves stored in its own country, spending fresh revenue, or going into default, according to Bloomberg. The move comes just days before payment on the country's sovereign debt was due, and it's meant to increase pressure on Russian President Vladimir Putin to end his invasion of Ukraine. The US and its partners imposed a slew of tough economic sanctions on Russia in late February, but are working to beef them up, even more.

Russia is in the midst of a recession, with spiking inflation, food shortages

Treasury spokesperson also stated that Russia is in the midst of a recession, with spiking inflation, food shortages, and a currency that no longer functions in most of the world, according to Bloomberg. Meanwhile, Putin's government has stayed timely on its international debt payments despite warnings from credit-rating firms and others. Last week, Russia's central bank announced that its foreign currency and gold reserves had dropped to $604.4 billion as of March 25, the lowest level since August. It represents a $38.8 billion reduction from February, reflecting the decline since Russia's incursion began.

Russia can still get payments for oil and gas since sanctions imposed by the United States and its allies do not apply to energy transactions. Even though the Bank of Russia's restrictions prevented it from intervening in the market, the Governor of the Bank of Russia, Elvira Nabiullina stated that the bank sold foreign currency to boost the ruble on February 24 and the following day, when the invasion began.

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