Russia debt compared: How bad is Russia's debt as Putin heads for first default

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Sanctions enacted by other countries following Vladimir Putin’s invasion of Ukraine is making it impossible for the Kremlin to pay off part of its debt. Sanctions have restricted the country’s access to international banking networks, with the money now reportedly stuck in a holding account via financial company Euroclear.

Euroclear is meant to distribute the payment to investors, but it has not yet been received.

Jay Auslander, a US lawyer who has worked on many government debt cases, said: “They have not got it. If this money has not arrived within 30 days of the due date, that is, Sunday evening, that will widely be considered a default.”

Russia paid the money to Euroclear on May 27, but because it has not been distributed to the owed parties, it will count as a default if the money is not received by the end of Sunday.

The payment was made by Russia two days after the US Treasury decided not to renew the special exemption in sanctions rules allowing investors to receive interest payments from Russia.

Euroclear has said it is adhering to international sanctions but did not say if the payment had been blocked.

Russia has said it now wants to pay debts in Roubles direct from Russian banks, but this would be in direct contravention of many financial contracts.

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“The Russian government has already lost the opportunity to issue dollar-denominated debt. Already as of now, Russia can’t borrow from most foreign countries.”

Russia has the resources to pay off its debts, but could struggle to acquire loans in the future if it has a default registered.

Finance Minister Anton Siluanov has called the situation a “farce”, and insisted that because Russia has paid the money to Euroclear it does not count as a default.

He said on Thursday: “There is every ground to suggest that in artificially barring the Russian Federation from servicing its foreign sovereign debt, the goal is to apply the label of ‘default’.

“Anyone can declare whatever they like and can try to apply such a label.

“But anyone who understands the situation knows that this is in no way a default.”



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