2022 Russian debt default

{{Further|International sanctions during the 2022 Russian invasion of Ukraine|SWIFT ban against Russian banks}}

The United States Treasury Department in February 2022 moved to cut off Russia from the global economy after the 2022 Russian invasion of Ukraine, announcing that it would immobilize Russian central bank assets that are held in the United States and impose sanctions on the Russian Direct Investment Fund.{{Cite news | url=https://www.nytimes.com/2022/02/28/us/politics/us-sanctions-russia-central-bank.html | title=U.S. Escalates sanctions with a freeze on Russian central bank assets | newspaper=The New York Times | date=28 February 2022 | last1=Rappeport | first1=Alan }} The $284 billion or more in frozen assets is nearly half of the $585 billion that Russia had stockpiled as of June 2021.{{Cite web |last1=Hersher|first1=Monica|last2=Murphy|first2=Joe|date=17 March 2022| url=https://www.nbcnews.com/data-graphics/russian-bank-foreign-reserve-billions-frozen-sanctions-n1292153 | title=Graphic: Russia stored large amounts of money with many countries. Hundreds of billions of it are now frozen. | website=NBC News |department=The Data Point}}

The Biden administration initially allowed Russia to continue to repurpose the substantial funds it has kept in U.S. financial institutions to make required payments on its sovereign debt. But on April 4, the Treasury Department banned Russia from withdrawing funds held in US banks to pay off its debt obligations.{{Cite news |last1=Stein|first1=Jeff|last2=Gregg|first2=Aaron|date=5 April 2022|title=U.S. impedes Russia's debt payments as new sanctions package emerges |language=en-US |newspaper=The Washington Post |url=https://www.washingtonpost.com/us-policy/2022/04/05/russia-default-banks-currency/ |access-date=2022-04-30 |issn=0190-8286}}

On 4 April 2022, Russia technically defaulted on its foreign debt by failing to pay its obligations in US dollars (and after the grace period it actually defaulted because it did not pay 30 days grace period interest of around 1.9 million USD). On 8 April, the credit agency S&P Global predicted that Russia will inevitably be in "selective default on foreign currency obligations"{{Cite news |date=2022-04-09 |title=S&P cuts Russia's foreign currency rating to 'selective default' |language=en |work=Reuters |url=https://www.reuters.com/business/sp-cuts-russias-foreign-currency-rating-selective-default-2022-04-09/ |access-date=2022-04-29}} (NR rating after CC rating{{Cite news |date=2022-03-17 |title=S&P cuts Russia's ratings to 'CC' on debt default risk |language=en |work=Reuters |url=https://www.reuters.com/business/finance/sp-cuts-russias-ratings-cc-debt-default-risk-2022-03-17/ |access-date=2022-04-29}}) because it tried to pay obligations on dollar denominated debt in rubles, which could not be converted into "dollars equivalent to the originally due amounts", since every government can just "print money" in the currency it controls. A selective default occurs if a borrower defaults on specific (foreign, or more accurately, "foreign currency") obligations but not all of its debt.{{Cite web|url=https://www.cnn.com/2022/04/11/investing/russia-default-sp/index.html|title=Russia has defaulted on its foreign debt, says S&P|last=Cooban|first=Anna|website=CNN Business|date=11 April 2022}}{{Cite news|url=https://www.nytimes.com/2022/04/10/business/russia-debt-default-rubles.html|title=S&P Global Places Russia in 'Selective Default'|first=Eshe|last=Nelson|newspaper=The New York Times|date=April 10, 2022}}{{Cite web|last=Wile|first=Rob|date=11 April 2022|url=https://www.nbcnews.com/business/business-news/russia-debt-default-explained-selective-default-rcna23873|title=Russia slips into 'selective default' on some foreign debt|website=NBC News}}

Two dollar denominated bonds issued by the Russian government matured on 4 April 2022. On 5 April, Russia attempted to pay its bondholders with dollars from $600 million of reserves held in US banks, but these were blocked by the US as part of the sanctions against Russia for its invasion of Ukraine.{{Cite news|url=https://www.reuters.com/business/us-cracks-down-russian-debt-payments-latest-sovereign-payments-halted-2022-04-05/|title=U.S. stops Russian bond payments, raising risk of default|first1=Megan|last1=Davies|first2=Alexandra|last2=Alper|publisher=Reuters|date=April 5, 2022}}

The Russian government had a 30-day grace period to meet its contractual obligations, but S&P Global stated that it expects that investors will not be able to convert rubles into “dollars equivalent to the originally due amounts” and sanctions will reduce Russia's "willingness and technical abilities to honor the terms and conditions" of the loans.

Previously, on 16 March, Russia managed to pay through a new method{{Cite web |script-title=ru:Утвержден временный порядок исполнения государственных долговых обязательств Российской Федерации в иностранной валюте |url=https://minfin.gov.ru/ru/press-center/?id_4=37805-utverzhden_vremennyi_poryadok_ispolneniya_gosudarstvennykh_dolgovykh_obyazatelstv_rossiiskoi_federatsii_v_inostrannoi_valyute |access-date=2022-04-29 |website=minfin.gov.ru |language=ru}} (acting on a general license issued by the US Office of Foreign Assets Control, which was valid until May 25) and thus avoided technical default,{{Cite web |title=Press review: Russia avoids technical default and US may remove IRGC from terror list |url=https://tass.com/pressreview/1423919 |date=18 March 2022|access-date=2022-04-29 |publisher=TASS}}{{Cite web |date=2022-03-18 |title=Russia Avoids Technical Default, But Faces $4.6bn In Payments for 2022 |url=https://marketnews.com/russia-avoids-technical-default-but-faces-4-6bn-in-payments-for-2022 |url-access=subscription|access-date=2022-04-29 |website=Market News |language=en}} it also threatened to sue if forced into default{{Cite web |last=Tan |first=Huileng |date=11 April 2022|title=Russia says it will sue if forced into a default — which would be the country's first external sovereign debt default in over a century |url=https://www.businessinsider.com/russia-sovereign-bond-debt-default-sanctions-dollar-rubles-ukraine-war-2022-4 |access-date=2022-04-29 |website=Business Insider |language=en-US}}{{Cite web |last=Mozée |first=Carla |title=Russia plans to sue to regain access to $300 billion in frozen foreign currency reserves |url=https://markets.businessinsider.com/news/stocks/russia-foreign-currency-reserves-sanctions-sue-lawsuits-western-war-2022-4 |date=11 April 2022|access-date=2022-04-29 |website=Markets Insider |language=en-US}} or use cryptocurrency.{{Cite web|last=Evans|first=Brian|date=22 April 2022|title=Russian central bank chief denies Moscow is at risk of default and touts digital ruble for international payments |url=https://www.businessinsider.in/cryptocurrency/news/russian-central-bank-chief-denies-moscow-is-at-risk-of-default-and-touts-digital-ruble-for-international-payments/articleshow/90988823.cms |access-date=2022-04-29 |website=Business Insider}}

Earlier, Russian Minister of Finance Anton Siluanov said that Russia would repay its foreign currency debt only if its foreign currency accounts were unfrozen.{{cite web|url=https://tass.com/economy/1433387|title=Russia's Finance Ministry fulfils Eurobonds obligations for $649.2 mln in rubles|publisher=TASS|date=6 April 2022}} On 29 April, Russia's Finance Ministry said that it made an attempt to repay US$649.2 million on Russia-2022 and Russia-2042 Eurobonds (in dollars through non-sanctioned {{Ill|Bank Dom.RF JSC|ru|Дом.рф (банк)}} to Bank of New York Mellon Corp. and then to Citibank N.A., London branch{{Cite news |date=2022-04-29 |title=Russia Says It Made Sovereign Bond Payments in U.S. Dollars |language=en |work=Bloomberg.com |url=https://www.bloomberg.com/news/articles/2022-04-29/russia-said-it-made-sovereign-bond-payments-in-u-s-dollars |access-date=2022-05-04}}), but it was not clear if the payments would reach the recipients and Russia would avoid default.{{Cite web |first1=Matt|last1=Clinch|first2=Elliot|last2=Smith|date=2022-04-29 |title=Russia aims to avert historic debt default with last-ditch dollar bond payments |url=https://www.cnbc.com/2022/04/29/russia-attempts-last-ditch-dollar-bond-payments-to-try-to-avert-historic-default.html |access-date=2022-04-30 |website=CNBC |language=en}} On 4 May, US and UK regulators cleared the payments{{Cite news|first1=Libby|last1=Cherry|first2=Giulia|last2=Morpurgo|first3=Lyubov|last3=Pronina|date=2022-05-03 |title=Russia Dodges Default as Some Investors Receive Dollar Funds |language=en |work=Bloomberg.com |url=https://www.bloomberg.com/news/articles/2022-05-03/russia-poised-to-dodge-default-as-clearinghouse-processes-funds |access-date=2022-05-04}} with a technical date of 2 May.{{Cite web |title=Credit Derivatives Determinations Committee » The Russian Federation |url=https://www.cdsdeterminationscommittees.org/cds/the-russian-federation-3/ |access-date=2022-06-03 |website=www.cdsdeterminationscommittees.org}}

Five days before the May 25 license expired, Russia again managed to pay on Russia-2026 and Russia-2036 Eurobonds but did not avoid falling into the grace period,{{Cite news |date=2022-05-28 |title=Russia's Whipsaw Week Ends With Default Clock Ticking |language=en |work=Bloomberg.com |url=https://www.bloomberg.com/news/articles/2022-05-28/russia-s-whipsaw-week-ends-with-default-clock-ticking |access-date=2022-08-28}} because its money got stuck in Euroclear Bank (that was classified as an actual default by Moody's 30 days later on 27 June). It paid US$71.25 million for a dollar-denominated eurobond and 26.5 million euros ($28 million) for euro-denominated notes. The next payments after the due on 27 May one were $235 million across two Eurobonds due on June 23.{{Cite news |last=Strohecker |first=Karin |date=2022-05-20 |title=Russia makes early debt payment dash to dodge default |language=en |work=Reuters |url=https://www.reuters.com/business/finance/russia-makes-early-debt-payment-dash-bid-swerve-default-2022-05-20/ |access-date=2022-05-25}}{{Cite web |title=Update: New Mechanism Established for Repayment of Russian Sovereign Debt |url=https://www.morganlewis.com/pubs/2022/06/update-new-mechanism-established-for-repayment-of-russian-sovereign-debt |access-date=2023-03-01 |website=www.morganlewis.com |language=en}}

The 30-day grace period still required interest to be paid, so at the end of May the money paid on 29 April (and got into Citibank N.A. on 2 May) was about 1.9 million USD short, and the technical default from 4 April was converted into a real default, as recognized when 13 members of the Credit Derivatives Determinations Committee for Europe voted on 1 June, only one of them (Citibank N.A.) voting in favour of Russia.

A default for the purposes of CDS contracts "occurs once the determination committee votes for a credit event, which has now happened," said Gabriele Foa, portfolio manager of the Global Credit Opportunities Fund at Algebris.{{cite web|title=Teetering on default, Russia misses $1.9-million payment, committee determines|url=https://www.rappler.com/business/committee-determines-russia-misses-payment-accrued-interest-dollar-bond-june-1-2022/|website=RAPPLER|access-date=3 June 2022|date=2 June 2022}} "Of course…it is a very small amount, so the definition of default is very technical. If, as it seems, it is not possible for foreign investors to receive dollars starting May 25, the default will soon be more material."

Finance Minister Anton Siluanov dismissed the default status as a "farce", since Russia has plenty of dollar and euro funds to repay the debt. Associated Press reported that the official default on Russian's foreign debt would take time to be confirmed. Financial analysts described Russia's situation as unique, since it has extensive amounts of cash to fulfill its debt obligations and very small foreign debt compared to USA.[https://www.bloomberg.com/news/articles/2022-06-26/russia-defaults-on-foreign-debt-for-first-time-since-1918 "Russia Defaults on Foreign Debt for First Time Since 1918"]. Bloomberg News. Retrieved 27 June 2022.[https://apnews.com/article/russia-ukraine-foreign-debt-sovereign-322dd9b66c6954063ef810c5922f0315 "What's the impact of a Russian debt default?"] AP News. Retrieved 27 June 2022.

{{See also|Economic impact of the 2022 Russian invasion of Ukraine}}

On Monday 27 June 2022, Moody's rating agency declared that Russia defaulted on its foreign debt after missing a payment deadline the preceding Sunday.{{cite news|title=Russia in historic default as Ukraine sanctions cut off payments|last1=Strohecker|first1=Karin|last2=Shalal|first2=Andrea|last3=Chan|first3=Emily|work=Reuters|date=27 June 2022|access-date=27 June 2022|url=https://www.reuters.com/markets/europe/russia-slides-towards-default-payment-deadline-expires-2022-06-26/}}

In September 2023 a Russian USD denominated bond with a value of $3 billion became repayable. Repayment was made in rubles, with the Russian National Wealth Fund selling currencies to offset any bond owners who needed to sell their rubles, so supporting the ruble FX rate.{{cite web |title=Bank of Russia comments on FX market operations |url=https://www.cbr.ru/eng/press/event/?id=17047 |date=6 September 2023}}

• 1998 Russian financial crisis

• {{annotated link|2022 Russia–European Union gas dispute}}
• {{annotated link|Economic impact of the 2022 Russian invasion of Ukraine}}
• {{annotated link|List of sovereign debt crises}}
• {{annotated link|SWIFT ban against Russian banks}}

{{reflist}}

{{2022 Russian invasion of Ukraine}}

{{Economy of Russia}}

Category:2022 in economic history

Category:2020s in Russia

Category:Economic history of Russia

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