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Credit…Sarahbeth Maney/The New York Times

WASHINGTON — The Biden administration will begin preventing Russia from paying U.S. bondholders, increasing the likelihood of Russia’s first foreign debt default in more than a century.

A waiver of sweeping sanctions the United States imposed on Russia as punishment for its invasion of Ukraine has allowed Moscow to continue paying its debts since February. But that exception will expire on Wednesday and the United States will not extend it, according to a notice published by the Treasury Department on Tuesday. As a result, Russia will be unable to pay back billions of dollars of debt and interest on bonds held by foreign investors.

The move represents an escalation of US sanctions at a time when the war in Ukraine continues and Russia shows little sign of relenting. Biden administration officials had debated whether to extend what is known as a blanket license, which has allowed Russia to pay interest on debt it sold. By extending the waiver, Russia would have continued to deplete its US dollar reserves and US investors would have continued to receive their guaranteed payments. But officials, who have been trying to ratchet up pressure on Russia’s economy, ultimately determined that Russia’s default would not have a significant impact on the global economy.

Treasury Secretary Janet L. Yellen signaled how the Biden administration was leaning at a news conference in Europe last week, when she said the waiver was created to allow an “orderly transition” so investors could sell securities. It was always intended to be for a limited time, she said. And she noted that Russia’s ability to borrow money from foreign investors has already been essentially cut off through other US-imposed sanctions.

“If Russia can’t find a legal way to make these payments, and they technically default on their debt, I don’t think that really represents a significant change in Russia’s situation,” said Ms Yellen. “They are already isolated from global capital markets, and that would continue.”

Although the economic impact of a Russian default might be minimal, it was an outcome Russia had been trying to avoid and the Biden administration’s move represents an escalation of US sanctions. Russia has already tried unsuccessfully to do so. ruble bond payments and has threatened legal action, arguing that it should not be considered in default on its debt if it is not allowed to make the payments.

“We can only speculate what the Kremlin is most worried about about the default: the blemish on Putin’s economic management record, the reputational damage, the financial and legal dominoes a default sets in motion, etc.” said Tim Samples, a professor of legal studies at the University of Georgia Terry College of Business and an expert on sovereign debt. “But one thing is quite clear: Russia was keen to avoid this scenario, even willing to make payments in valuable, unsanctioned foreign currency to avoid a major default.”

Sanctions experts have estimated that Russia has around $20 billion in outstanding debt that is not in rubles. It is unclear whether the European Union and Britain will follow the US lead, putting even more pressure on Russia and leaving a wider swath of investors unpaid, but most recent sanctions actions have been closely coordinated. .

The prospect of a Russian default has already saddled some big US investors with losses. Pimco, the investment management firm, has seen its Russian bond holdings decline in value by more than $1 billion this year and pension funds and mutual funds with exposure to emerging-market debt have also seen declines.

In the short term, Russia has two foreign currency bond payments due Friday, both of which have clauses in their contracts that allow payment in other currencies if “for reasons beyond its control” Russia is unable to make the payments on time. originally agreed. badge.

Russia owes about $71 million in interest payments on a dollar-denominated bond due in 2026. The contract has a provision that it will be paid in euros, British pounds and Swiss francs. Russia also owes 26.5 million euros ($28 million) in interest payments on a euro-denominated bond due in 2036, which can be paid in alternative currencies, including the ruble. Both contracts have a 30-day grace period for payments to reach creditors.

The Russian Finance Ministry said on Friday that it had sent the funds to its paying agent, the National Depository for Payments, a Moscow-based institution, a week before the payment was due.

The Ministry of Finance said that it had fulfilled these debt obligations. But more transactions with international financial institutions are required before payments can reach bondholders.

Adam M. Smith, who served as a top sanctions official at the Obama administration’s Treasury Department, said he expected Russia to default sometime in July and likely a wave of lawsuits from Russia. of Russia and its investors.

Although a default will inflict some psychological damage on Russia, he said, it will also increase borrowing costs for ordinary Russians and hurt foreign investors who were not involved in Russia’s invasion of Ukraine.

“The interesting question for me is: What is the point of politics here?” Mr. Smith said. “That is what is not entirely clear to me.”

Alan Rappeport reported from Washington and Eshe Nelson from London.

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