The US Treasury might have made a mistake in its eagerness to trigger a Russian default Some countries are unable to pay their debts because they don’t have the dough. Others have the money but are just unwilling to pay. To this taxonomy we can now add a third category — a solvent sovereign ready, indeed eager, to pay creditors but that cannot do so because it is prevented from sending the money through the international payments system. As a result of a decision announced by the US Treasury on May 24, the Russian Federation finds itself in this third category. Under a prior policy that expired on May 25, US holders of Russian sovereign bonds were permitted to receive debt payments on those securities as long as the source of the money was an account that was not frozen by the sanctions imposed after Russia’s invasion of Ukraine. The US Treasury has now allowed that permission to expire.
Lee Buchheit & G. Mitu Gulati, Forced sovereign debt defaults, Financial Times ( (June 1, 2022).