What Russia's June 2022 Eurobond default meant in practice
A look back at the missed payments on Taiwanese-owned Eurobonds and the dispute over whether the default was real.
What did Russia's default on foreign-currency debt actually change by 1 July 2022? The answer, in the days after the 27 June deadline, was very little in the short term.
As reported at the time, 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. The country was already unable to borrow internationally because of the SWIFT ban against Russian banks.
A default of technicalities
Background compiled later describes the 27 June event as a default on certain foreign-currency debt, caused by sanctions and disrupted payment and clearing channels that prevented bondholders from receiving funds. It 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 had come on 2 June, when Russia missed a 30-day interest payment, incorrectly not counting interest for the grace period. That failure, of $1.9 million, was too small to trigger a cross-default across other instruments, since the threshold in the documents for other Russian eurobonds is at least $75 million.
The default arose from technicalities: payment in dollars was impossible under US and EU sanctions, which meant it did not mark an actual lack of capability to pay its debts.
