Treasury License Expiration to Cause Russia to Default, White House Says
The Treasury Department’s decision to end an exemption for certain Russia-related debt payments will cause the Russian government to default, the White House said last week. Treasury announced May 24 it would allow the license to expire, ending transactions necessary for dealings in debt or equity with Russia’s Bank for Development and Foreign Economic Affairs Vnesheconombank, Bank Otkritie Financial, Sovcombank, Sberbank of Russia and VTB Bank (see 2205240054).
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“This means that Russia will likely fail to meet its obligation and face default, an enduring sign of their status as a pariah in the global financial system,” White House Press Secretary Karine Jean-Pierre told reporters. Jean-Pierre said the license, which had been in place since Russia’s invasion of Ukraine in February (see 2202240069), provided “for an orderly transition so that the bond holders could get paid” but is no longer needed.
“We expect the impact of the U.S. and the global economy to be minimal given Russia has already been isolated financially,” she said. “That being said, the Treasury Department continues to monitor and have conversations with the global financial community.”
Jean-Pierre added that the U.S. doesn’t plan to offer Russia sanctions relief in exchange for Moscow unblocking Black Sea ports. Russia has blocked Ukraine’s Black Sea ports since February, restricting exports of more than 20 million tonnes of grain to the rest of the world, Reuters reported May 25.
“We want to be very, very clear here,” Jean-Pierre said. “This is Russia who is actively blocking the export of food from Ukrainian ports and is increasing world hunger. This is on them.”
Jean-Pierre said Russia’s war in Ukraine is “devastating global food security,” noting Ukraine was the world’s largest exporter of sunflower oil, the fourth-largest exporter of corn and one of the largest exporters of wheat. "Now there are tons of products sitting in silos in Ukraine and on ships that are unable to set sail due to Russia’s naval blockade,” she said.
U.S. sanctions are “not preventing the export of Ukrainian or Russian agriculture,” Jean-Pierre added. She also said they aren’t preventing the “ordinary transactions that are necessary for these exports, such as banking or shipping.” The Biden administration won’t consider a conversation about lifting the sanctions, Jean-Pierre said.