Russia appears to default. Here's why Putin won't recognize it The clock ran out on Russia's payments. But there's a twist: Russia does not consider itself in default because the country has the money, just its payments have been blocked by Western sanctions.

What's happening with Russia's 1st default on foreign debt in a century

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript


Russia appears to have defaulted on its foreign currency debt for the first time in over a century. However, there is a bit of a twist because Russia does not consider itself in default because the country says it has the money, but its payments have been blocked by Western sanctions. All right, so what happens next? We have NPR's Alina Selyukh here to explain - what? - in 1918 - the Bolshevik Revolution. That's the last time this has happened. Alina, what does it actually mean that Russia appears to have defaulted?

ALINA SELYUKH, BYLINE: OK. Here's what happened. Like any country, Russia sold bonds to support its economy and promised to pay interest in euros and dollars. But after it invaded Ukraine, the U.S. and Europe wanted to weaken the Russian war chest, and they froze Russia's access to euros and dollars held overseas. Russia kept paying its debts from currency reserves at home. But in May, the U.S. Treasury blocked even those transfers to American investors. That left two Russian interest payments, worth about a hundred million dollars, stuck. They missed a deadline, got a grace period and that clock ran out on Sunday. Reports say bondholders have not received that money, which technically means a default.

MARTÍNEZ: Technically means a default. So what's Moscow's take on all this?

SELYUKH: Well, you know, the Kremlin today said any default label was absolutely unlawful. For weeks, Russian Finance Minister Anton Siluanov has been saying any defaults would be manufactured, artificial. Russia has been trying to pay. Its latest workaround involved ruble transfers that creditors could convert into euros and dollars. Siluanov argues Russia's obligations are fulfilled. It's up to the bondholders to come claim their money. He was basically saying, we'll do everything we can to lead the horse to water - can't make the horse drink.

And this feeds into the Kremlin's frequent line that the U.S. just wants to inflict misery on Russians - in this case, by forcing a default. The U.S. and Europe, of course, would argue Russia controls all this by refusing to stop its war in Ukraine.

MARTÍNEZ: And given that Russia seemingly has no intention to end that war, what does a default actually mean in practical terms?

SELYUKH: This is the anti-climactic bit because Russia already faces most punishments that might befall an economy in default. Big businesses, like McDonald's or Nike, have left. It's a financial and political outcast, but it's still getting money for its oil and gas. And the ruble has been artificially boosted to the strongest level in seven years. Here's sovereign debt expert Mitu Gulati from the University of Virginia.

MITU GULATI: Normally, with a default, the big, bad thing that happens is that my reputation is in the mud and the rating agencies downgrade me. Your interest rate at which you borrow skyrockets. Russia's not borrowing from anybody. They've invaded another country. Their reputation being in the mud is not exactly a big concern.

SELYUKH: And frankly, its foreign investors have had weeks to figure out what to do. So in the short term, not much is likely to change.

MARTÍNEZ: All right, short term - what about the long term?

SELYUKH: That is the question. Some creditors might eventually sue Russia to get that money. That will be super messy. It will take years. Will Russia be able to borrow on the international market going forward? Will its economy unravel? We'll be watching if investors see the default as Russia being cornered or further burning its own bridges with the world.

MARTÍNEZ: NPR's Alina Selyukh, thanks a lot.

SELYUKH: Thank you.

Copyright © 2022 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.