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What Russia's June 2022 bond default meant
Summary
A retrospective on the missed Eurobond payments, Moscow's reaction and why the immediate consequences were limited.
What did it mean when Russia defaulted on its foreign-currency debt? On 30 June 2022, the question was still fresh, three days after the lapse of 27 June 2022, when Russia defaulted on two Taiwanese-owned Eurobonds worth US$100 million.
As reported at the time, Western sanctions led Euroclear to block Russian attempts to service the debt before the deadline. Moscow described the default as artificially manufactured and called it a farce.
Limited immediate consequences
The default was expected to have few immediate consequences for Russia. The country was already unable to borrow internationally because of the SWIFT ban against Russian banks.
Technicalities, not inability to pay
Later accounts of the episode put the default in a longer sequence. On 2 June, Russia had already missed a payment of $1.9 million, after incorrectly not counting interest for the grace period. That sum was not enough to trigger a cross-default across other instruments, because the minimum threshold in documents for other Russian eurobonds is at least $75 million.
The 27 June default was widely described as Russia's first foreign sovereign debt default since 1918, though the country had defaulted on domestic ruble-denominated government debt in 1998. It arose from technicalities: payment in dollars was impossible because of US and EU sanctions, but it did not mark an actual lack of capability to pay its debts.
