The United States is planning to block Russia’s ability to make payments to its American bondholders by allowing a key waiver to expire next week, as Washington ups the ante in its economic warfare against Moscow over the conflict with Ukraine.
A Biden administration official claimed on Tuesday that the measure could put Russia closer to the brink of default, according to Reuters.
Moscow has so far successfully managed to make its international bond payments despite the US-led sanctions that have hindered the process though.
Russia, which has not defaulted on its external debt for more than 100 years, has $40 billion of international bonds and last month made overdue bond payments to avoid default.
However, now Russia is facing a May 25 deadline when a US license allowing it to make payments is set to expire.
According to reports, the Biden administration is considering allowing the waiver to expire as scheduled.
"It's under consideration but I don't have a decision to preview at this time," the official told Reuters. "We are looking at all options to increase pressure on (Russian President Vladimir) Putin."
Bloomberg News reported the Biden administration has decided against extending the waiver in order to increase financial pressure on Moscow.
Western countries have slapped unprecedented sanctions on Russia since President Vladimir Putin declared a military offensive against Ukraine on February 24.
The temporary general license 9A, issued by the US Treasury Department's Office of Foreign Assets Control on March 2, had made an exception for the purposes of "the receipt of interest, dividend, or maturity payments in connection with debt or equity."
That measure has allowed Russia to keep making payments to investors to avert a default on its government debt and allowed American investors to continue to collect coupon payments.
The Biden administration has imposed harsh economic and banking sanctions on Russia in response to Russia's military actions in Ukraine.
US President Joe Biden said the sanctions would limit Russia's ability to do business in dollars, euros, pounds and yen.
The US president claimed that the only other alternative to the sanctions would be to start a “Third World War.”