Russia's Eurobond default: what happened by 29 June 2022

What did Russia's default actually mean as of 29 June 2022? Two days earlier, on 27 June 2022, Russia defaulted on two Taiwanese-owned Eurobonds worth US$100 million. Western sanctions had 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". The immediate consequences for Russia were expected to be few, because the country was already unable to borrow internationally. The SWIFT ban against Russian banks had closed that route.

A default of technicalities

The default concerned foreign-currency debt. Sanctions and disrupted payment and clearing channels prevented bondholders from receiving funds. As described later, the event was widely seen as Russia's first foreign sovereign debt default since 1918, though the country had defaulted on domestic ruble-denominated government debt in 1998.

An earlier miss had occurred on 2 June, when Russia failed to pay interest due within a 30-day grace period, incorrectly not counting that interest. The unpaid amount was $1.9 million. That was not enough to trigger a cross-default across other instruments, since the minimum threshold in documents for other Russian eurobonds is at least $75 million.

The background to the default was that payment in dollars had become impossible under US and EU sanctions. It did not mark an actual lack of capability to pay its debts.