2022 Russian debt default

The United States Treasury Department in February moved to further cut off Russia from the global economy after the Russo-Ukrainian War, 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.[1] The $284 billion or more in frozen assets is nearly half of the $585 billion that Russia had stockpiled as of June 2021.[2]

The Biden administration had 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.[3]

On 4 April 2022 Russia technically defaulted on its foreign debt by failing to pay its obligations in US dollars. On 8 April the credit agency S&P Global predicted that Russia will inevitably be in "selective default on foreign currency obligations"[4] (NR rating after CC rating[5]) 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 (no money is actually printed, i.e. USA can create new virtual money in USD$, since the Federal Reserve can purchase federal US Treasury bonds, banks can then draw on the reserve, so more money is “created”). A selective default occurs if a borrower defaults on specific (foreign or more accurate "foreign currency") obligations but not all of its debt.[6][7][8]

Two dollar denominated bonds issued by Russian government matured on 4 April 2022.[6] On 5 April, Russia attempted to pay its bond holders with dollars from $600M 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.[9]

The Russian government has a 30 day grace period to meet its contractual obligations but S&P Global stated that it expects that Russia will not be able to convert its rubles into “dollars equivalent to the originally due amounts” and due to sanctions that reduce Russia's "willingness and technical abilities to honor the terms and conditions" of the loans.[6]

Previously on 16 March, Russia managed to pay through new method[10] (acting on a general license issued by the US Office of Foreign Assets Control, which is valid until May 25) and thus avoided technical default,[11][12] it also threatened to sue if forced into default[13][14] or use cryptocurrency.[15]

Earlier, Russian Minister of Finance Anton Siluanov said that Russia would repay its foreign currency debt only if its foreign currency accounts were unfrozen.[16]

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, but it was not clear if the payments would reach the recipients and Russia would avoid default.[17]