Russia has skirted a debt default thanks to a US payment exemption. Now the Treasury is weighing whether to let it expire, says Janet Yellen

• Russia has been able to avoid a default on foreign debt thanks to a US Treasury payment exemption.
• The carve-out has allowed Moscow keep up with roughly $2.9 billion in foreign debt payments so far.

A Treasury Department exemption that lets US financial firms process debt payments from Moscow is under review as its expiration date nears, Treasury Secretary Janet Yellen said.

Despite imposing a range of crippling sanctions on Russia for its invasion of Ukraine, the Treasury has allowed payments on bonds issued before March 1 to go through. But that exemption is set to expire on May 25, and Russia's next bond payments are due May 27.

Thanks to the loophole, the Kremlin has been able to avoid default by making about $2.9 billion in foreign debt payments so far.

During a hearing Tuesday before the Senate Banking Committee, Yellen said the future of this carve-out is being "actively" examined, and a decision hasn't been finalized. If the exemption isn't renewed, Russia could see its first foreign debt default in a century.

"We want to make sure that we understand what the potential consequences and spillovers would be allowing the license to expire," Yellen told lawmakers.

US banks, which are subject to Treasury regulations, have acted as key conduits for Russian bond payments. For example, Citigroup has served as a paying agent, and JPMorgan Chase has acted as a correspondent bank.

On May 3, Russia avoided a debt default at the last moment, as the government's dollar bond payments worked their way through the global financial system.