On Wednesday, Russia is due to pay $117 million in Eurobonds. The Central Bank of the Russian Federation said that payments can be made in rubles.

A default on Russia’s sovereign debt will add even more problems to its economy and financial system, making it more difficult for Moscow to find new sources of credit and increase the cost of future borrowing, a representative of the U.S. Treasury Department said.

“In case of default, it will be increasingly difficult for Russia to find new creditors, and those who provide loans will demand higher interest rates, which will lead to further depletion of the Russian economy,” the official said.

On Wednesday, Russia is due to pay $117 million in Eurobonds. The Ministry of Finance of the Russian Federation has stated that it will make payments in rubles if sanctions do not allow paying in dollars – the markets may regard this as a default.

Due to Western sanctions, Russia cannot access its Central Bank’s foreign currency assets. In addition, a ban has been imposed on transactions in dollars and euros with Russian financial institutions under sanctions, including the Central Bank of the Russian Federation, which complicates any payments.

The U.S. Deputy Treasury Secretary Wally Adeyemo earlier said on CNBC that Russia’s choice of a way to pay its debts would deplete President Vladimir Putin’s resources to continue the war in Ukraine.

“This choice will ultimately put (Putin) in a position where he will have to make a decision on whether to continue or stop the invasion,” Adeyemo said.

A representative of the U.S. Treasury Department said that the sharp drop in prices for Russian sovereign bonds, which are now being sold at 20 cents and cheaper, indicates a high probability of default.