Report: Russia in Historic Foreign Debt Default

SEP 21 2022·Updated APR 29 2024

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The Facts

In a historic move, Russia has defaulted on its foreign debt obligations, according to some bondholders. Official confirmation is expected from bond rating agencies.
guardian
After a 30-day grace period expired on Sun., Russia allegedly missed the deadline to repay its interest of $100M on two Eurobonds. The default was seen as largely inevitable after the US Treasury Dept.'s Office of Foreign Assets Control (OFAC) said it wouldn't renew a license allowing Russia to repay debt in US dollars on May 25.
Reuters
In absence of the OFAC license, Russia said it would make repayments on dollar-denominated loans in rubles. On Jun. 22, Russian Pres. Putin issued a decree, the wording of which implied Moscow considers its obligations completed "if they are fulfilled in rubles in an amount equivalent to the value of obligations in foreign currency."
TASS
Finance Minister Anton Siluanov last week said Russia had fulfilled its international debt obligations using the new mechanism. However, Russian news agency TASS couldn't confirm whether holders of the two Eurobonds confirmed receipt of funds, acknowledging Russia may be in default unless they do so.
TASS
The last time Russia defaulted on foreign loans was in 1918, a year into the Bolshevik revolution. Russia also defaulted on domestic debts in 1998 during Boris Yeltsin's leadership.
BBC News
Russia maintains this situation is different, stating it has sufficient funds in its national reserves and accused the US and EU of manufacturing the default to give the appearance of Russian insolvency. Dmitry Peskov, a spokesman for the Kremlin, rejected that Russia had defaulted on its debts on Monday.
TASS

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The Spin

Anti-Russia narrative

Even if Russia moved the money to some escrow account as it claims, the obligations of the bonds aren't met until the funds have been released and bondholders confirm receipt. Russia cannot claim it had no other choice – it chose to wage its invasion into Ukraine and hasn't backed down in the face of sanctions.

Reuters

Pro-Russia narrative

Russia's foreign debts amount to $57B, but it has foreign reserves of nearly $600B. America and the EU are putting up false barriers to prevent Russia from repaying its loan obligations, which is giving the appearance of a default. Anyone who looks can see this isn't a default at all.

TASS