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US to block Russian debt payments next week, says secretary

US Treasury Secretary Janet Yellen signaled Wednesday that US officials are likely to close a loophole in Western sanctions that allowed Russia to continue making debt payments and avoid default.

Speaking at a press conference in Germany, Yellen said it was “reasonably likely” the license would expire on May 25.

“There has been no final decision on this. But I think it’s unlikely to continue,” Yellen said.

Such a move would effectively prevent Russia from making payments to US bondholders, increasing the risk of default. Russia has not defaulted on its foreign debt since the Bolshevik revolution more than a century ago.

US sanctions introduced after Russia invaded Ukraine ban transactions with the Russian central bank, the Ministry of Finance and the national wealth fund. However, the Treasury Department has issued a license that allows transactions related to the payment of debts.

“When we imposed sanctions on Russia, we created an exemption that would allow a period of time for an orderly transition to take place and for investors to be able to sell bonds,” Yellen said. “And the expectation was that it would be for a limited time.”

Yellen has signaled that she is not worried about the potential consequences of ending her leave.

“Russia cannot now borrow from global financial markets. It doesn’t have access to the capital market,” Yellen said. “If Russia can’t find a legal way to make these payments and technically fails to pay its debt, I don’t think that represents a significant change in Russia’s situation. They are already isolated from global capital markets and this would continue.”

Source: CNN Brasil

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