Argentina told Citibank and Bank of New York Mellon on Monday to either execute its debt payments or give it back money frozen in its dispute with two creditors.
A US federal judge has ordered the banks not to transfer payments on the debt Argentina restructured after its 2001 economic crisis until the country settles a $1.3-billion dispute with the two "holdout" creditors, hedge funds NML Capital and Aurelius Capital Management.
BNY Mellon is currently sitting on a $539-million interest payment Argentina was due to make on June 30, and Citibank is barred from making a $200-million payment due on September 30.
The government in Buenos Aires took out an advertisement in Argentine and US newspapers announcing it had asked BNY Mellon to step down as trustee for its restructured debt and transfer the $539 million to a new payment agent.
Economy Minister Axel Kicillof also called on Citibank to transfer the September 30 payment, saying it would violate Argentine law if it failed to do so.
The bank "has an Argentine contract that says it has to pay bonds issued under Argentine law, not New York law. When we deposit the money, they have to pay it," he told broadcaster Radio del Plata.
The situation has infuriated Argentina, which defaulted on its debt for the second time in 13 years when the grace period on the June 30 payment expired.
Argentina defaulted on $100 billion in debt in 2001, the largest default in history at the time.
It persuaded 93 percent of its creditors to take losses of up to 70 percent on the face value of their bonds in deals reached in 2005 and 2010.
But the holdouts refused to accept the write-down and took Argentina to court, winning a ruling that has derailed the country's debt restructuring.
Argentine President Cristina Kirchner was due Monday to meet billionaire investor George Soros, one of the restructured bondholders whose interest payments have been frozen, to discuss a plan to get out of default.
Kirchner is in New York to address the UN General Assembly on Wednesday, when she will likely hammer home her country's calls for a UN convention to stop hedge funds from scuppering restructuring plans for countries struggling to pay their debts.
She also sought to rally fellow Argentine-born Pope Francis to the cause during a meeting Saturday at the Vatican.