Russia Has Some Dollars Somewhere

The rough theoretical situation is that the government of Russia owns a lot of US dollars, it owes some of those US dollars to foreign bondholders, it would like to pay the bondholders their dollars, and the bondholders would like to receive them. But the US government has declared that US banks can’t move money on behalf of the Russian government; there was an exception for payments on Russia’s bonds, but that exception has ended. Russia’s bonds involve big US banks as paying agents, and if those banks won’t move the money then the money won’t move. And then Russia will be in default on its bonds, an outcome that it would prefer to avoid.

It … feels … like there could be a workaround? Like in some loose sense, one wants to say “Russia should simply send dollars to its bondholders without involving those US banks.” But that is a conceptual error. A dollar is an entry on the books of a US bank. If you own dollars, what you own is a number in an account at a US bank.1 Moving dollars means telling US banks to reduce the number in your account and increase the number in someone else’s account. If you cut the US banks out of the process, there’s no process.