LONDON, Reuters – Russia has been prevented by the United States from making payments to its sovereign creditors from U.S. bank reserves. This raises the possibility of default unless Russia finds other cash sources or a solution within the next 30 days.

Russia, despite the unprecedented Western sanctions that were imposed following Moscow’s invasion in Ukraine, has been able to keep its international debt from defaulting so far. Washington is trying to make it more difficult.

What DID THE U.S. TRADE SAY?

Russia would pay $552.4 millions on Monday to a maturing bond and $84 million for a coupon on Monday to a sovereign bond 2042.

According to the U.S. Treasury Department, Russia was allowed to access foreign currency reserves at U.S. financial institution’s central bank to pay coupon payments for dollar-denominated sovereign bonds on a case-by-case basis.

The U.S. Treasury, however, stated that as of Monday it “would not permit any dollar-debt payments to Russian government accounts at U.S. finance institutions.”

A spokesperson said that Russia must decide between reducing its remaining dollar reserves and generating new revenues, or going bankrupt.

The United States and its allies have frozen roughly half the $640billion in Russian gold and foreign currency reserves since Russia’s invasion and occupation of Ukraine. Moscow called it a “specially military operation”.

WHAT IS CHANGED

U.S. Treasury stated Monday’s amount of payment, the highest due on sovereign bonds since February 24, invasion, was “the right opportunity for Russia to take more difficult decisions.”

There was however no indication that U.S. banks could be prohibited from being correspondent banks or processing Russian debt payments. JPMorgan Chase, NYSE:), has processed recent debt coupon payment as a correspondent bank.

Russia might have already used half of the funds that are not being frozen by sanctions. Russia can still use those resources to stay out of default.

Exports of crude oil and natural gas still bring in billions. According to the Institute of International Finance, Russia’s March oil export earnings are expected to reach $12.3 billion. This is a significant increase on March 2021.

Moscow stated Monday that it expects higher oil prices to boost April revenues from energy sales of 798.4 trillion roubles ($9.6billion).

WHAT IS COMING NOW?

Russia has 30 days grace period for the bonds, which means Russia can still pay its obligations before default is triggered.

Russia’s readiness to pay is what has enabled it so far to avoid its first default after a 1998 financial crisis and its first global market debt default since the 1917 Bolshevik Revolution.

Russia also has been trying to reduce its external liabilities. Russia purchased back around three-quarters a $2B bond payment last week by using roubles, just as it was due for maturity on Monday. This move, though it was aimed at domestic rather than international investors, reduced the dollar liabilities.

However, there’s another deadline: U.S. entities and persons cannot make transactions with Russia’s central bank, finance ministry or national wealth funds in connection to debt payments. This temporary general license 9A is issued only by the U.S. Office of Foreign Assets Control.

The license expires on May 25, and the U.S. Treasury is not commenting on whether or not it will be renewed.

Russia will receive additional payments by May 27th. Russia also has 15 international bonds remaining with a face-value of approximately $40 billion. Investment funds and money managers from outside Russia held around $20 billion before the Ukraine crisis.