Russian Debt Payments Confront US Treasury With a Tough Call

Some Treasury officials have argued privately that allowing Russia to pay its debt would further drain its coffers and redirect resources that would otherwise be spent on weapons and military operations in Ukraine, according to a person familiar with the matter who discussed the internal deliberations on condition of anonymity.

Additional concerns include limiting the impact of the sanctions on the financial systems of the US and allies and not hurting American investors in Russian bonds. There’s also concern that if Russia is unable to pay its bondholders, and a default is declared, that the country could contest its liability in any legal proceedings that would follow.

“Ultimately, I think that the US and its allies still see an interest in the Russian government paying their American and global investors, especially if it drains Russia’s new assets,” said Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security. “We could see additional restrictions on what funds Russia can use for these payments or other tweaks, but my hunch is that a version of the general license will be extended. This reflects a preference to allow payment for global investors who made investments legally at the time.”

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