Home › World › Russia's Eurobond default and what it did not change
Russia's Eurobond default and what it did not change
Summary
A look back at the 27 June 2022 default on two Taiwanese-owned Eurobonds and why it carried few immediate consequences.
What did it mean when Russia defaulted on its foreign debt? On 28 June 2022, the day after the event, the question was already being asked. On 27 June 2022, Russia defaulted on two Taiwanese-owned Eurobonds worth US$100 million, after Western sanctions led Euroclear to block Russian attempts to service the debt before the deadline.
Moscow's response
Russia described the default as artificially manufactured and called it "a farce". The argument rested on the mechanics: sanctions had disrupted the payment channels through which bondholders would normally receive funds.
Why the immediate impact was limited
As reported at the time, the default was expected to have few immediate consequences for Russia. The country was already unable to borrow internationally because of the SWIFT ban on Russian banks, so a damaged credit standing had little new to take away.
A technical default
Later accounts added detail. The default was widely described as Russia's first foreign sovereign debt default since 1918, though Russia had defaulted on domestic ruble-denominated government debt in 1998. An earlier lapse, on 2 June, involved a failure to pay $1.9 million of interest. That sum was far below the $75 million minimum needed to trigger a cross-default across other Russian eurobonds.
The later assessment was that the default arose from technicalities. Payment in dollars had become impossible because of US and EU sanctions, which meant the event did not mark an actual lack of capability to pay. That distinction explains both Moscow's indignation and the muted practical effect: the sanctions that blocked payment had already closed the door to international borrowing.
