Bloomberg reports that the default is largely symbolic and Russia is simply defaulting since Western financial institutions won't accept Russia payments. Is there anything the West is gaining from this? Because you would think they would make exemptions since not receiving debt payment from Russia is also hurting them in the process.

Why aren't Western countries allowing Russia to pay its debt to them?

  • Closely related, maybe duplicate: politics.stackexchange.com/questions/71865/…
    – Allure
    Jun 27, 2022 at 5:28
  • Related question: Do economic sanctions prevent repaying debts?
    – gerrit
    Jun 27, 2022 at 13:48
  • Related: politics.stackexchange.com/questions/72540/… Jun 27, 2022 at 17:51
  • This "The West isn't accepting payments from Russia in fulfillment of its debt" (whether you meant nations or commercial creditors) is very misleading. The debts are denominated in Western currency, with payments to be made in the same currency. Russia tried to pay them off with rubles. (which are not equivalent to the currency the debt is denominated in, either formally or as a matter of practical valuation)
    – Ben Voigt
    Jun 29, 2022 at 18:00
  • Can you give any useful meaning to "Russia is simply defaulting since Western financial institutions won't accept Russia payments"? In all seriousness, how is that different from ""Russia is defaulting …"? What do you think the West might gain by not allowing Russia to pay its debt? Jun 29, 2022 at 21:47

3 Answers 3


By not allowing Russia to pay its debt, the West adds further financial costs to Putin's regime as a punishment for its invasion of Ukraine. This is consistent with economic sanctions against Russia and military and financial support of Ukraine. Specifically, the default serves to:

  • Make Russia’s access to foreign financing limited for decades.
  • Make Russia face higher borrowing costs for decades.
  • Downgrade Russia's credit rating, if the credit agencies rate it in the future.
  • Open the possibility of litigation against Russia by the creditors.
  • Crash other Russian bonds.
  • Cause other serious negative consequences for Russia: lower investment, lower growth, lower living standards, capital and human flight (brain drain), and a vicious circle of decline for the Russian economy.


A formal default would be largely symbolic given Russia cannot borrow internationally at the moment and doesn't need to thanks to plentiful oil and gas export revenues. But the stigma would probably raise its borrowing costs in future. [...] Credit ratings agencies usually formally downgrade a country's credit rating to reflect default, but this does not apply in case of Russia as most agencies no longer rate the country.

Russia pushed into historic default by sanctions. By Karin Strohecker, Andrea Shalal and Emily Chan. June 27, 2022: https://www.reuters.com/markets/europe/russia-slides-towards-default-payment-deadline-expires-2022-06-26/

Adam Solowsky, partner in the financial industry group at international law firm Reed Smith, told CNBC on Monday [...] “The existence of a Russian default may need to be resolved in litigation, but given the current state of the sanctions, a judgment in favor of investors may still not result in a payment any time soon,” [...]

Timothy Ash, senior emerging market sovereign strategist at Bluebay Asset Management, said while the default might not have much immediate market impact, Russian sovereign longer maturity eurobonds that were trading at 130 cents before the invasion have already crashed to between 20 and 30 cents, and are now trading at default levels. [...] “But this default is important as it will impact on Russia’s ratings, market access and financing costs for years to come. And important herein, given the U.S. Treasury forced Russia into default, Russia will only be able to come out of default when the U.S. Treasury gives bond holders the green light to negotiate terms with Russia’s foreign creditors.”

Ash suggested this process could take years or decades, even in the event of a cease-fire that falls short of a full peace agreement, meaning Russia’s access to foreign financing will remain limited and it will face higher borrowing costs for a long time to come.

He argued that Russia’s alternative sources of foreign financing beyond the West, such as Chinese banks, would also be reluctant to look beyond the default headlines.

“If they are prepared to run the secondary sanctions risks — which so far they have not — and still lend to Russia, they will add a huge risk premium to lending rates for the prospect of somehow being dragged into future debt restructuring talks,” Ash said.

“It just makes lending to Russia that much more difficult, so people will avoid it. And that means lower investment, lower growth, lower living standards, capital and human flight (brain drain), and a vicious circle of decline for the Russian economy.”

Russia slides into historic debt default as payment period expires. By Elliot Smith. Jun 27, 2022: https://www.cnbc.com/2022/06/27/russia-on-the-brink-of-historic-debt-default-as-payment-period-expires.html

  • 8
    Make Russia’s access to foreign financing limited for decades => only if non-Western capital markets don't have sufficient financing available for Russia. If China and India become the new Russian bond buyers, Russia will still do pretty well. Jun 27, 2022 at 17:53
  • 3
    @JonathanReez: I agree. But: "We know that there was some discontent from the Russian side when it came to the lack of Chinese support in terms of financial assistance and technology transfers after sanctions hit [following the February 24 invasion]. [...] Lessons from 2014 tell us that the Chinese private sector is very risk-averse because it's so dependent on the U.S. dollar for transactions and tends to stay away from sanctioned Russian entities and even does overcompliance with sanctions to be extra careful." rferl.org/a/china-russia-ukraine-war-sanctions-analysis/… Jun 27, 2022 at 17:59
  • 4
    They're only risk averse for now because of the high reliance on USD, but this can be expected to change rapidly as non-Western nations realize America cannot be trusted to keep their money safe and would GTFO to greener pastures/currencies. Jun 27, 2022 at 18:12
  • 10
    Good answer, but one caveat is the reputational effect of defaults wanes a bit after some years have passed: Argentina defaults frequently but seems to always find new creditors (albeit at higher rates). Jun 27, 2022 at 22:28
  • 4
    @JonathanReez: It's not just the US. It's also the EU, Japan,, Canada, and a number of other countries. There's a dependency not just on the USD, but also on SWIFT inter-bank payments etcetera.
    – MSalters
    Jun 28, 2022 at 9:22

Western governments are banning Western banks from doing business with Russia. If that means Russian companies and the Russian state cannot repay Western investors, they are going to accept that.

Also, the West did not freeze all Russian accounts. So it is in the interest of the West that Russia depletes their unfrozen accounts to repay debts, while it is in the interest of Russia to get accounts unfrozen for paying debts.


This question is somewhat of a loaded question (i.e., it is based on premise that hasn't been established) in that it treats the default as the direct goal. The default is a not entirely unwelcome result of the sanctions, but not necessarily a direct goal. Russia not being able to participate in the global financial system hurts them. Them defaulting is a result of that, and also hurts them. The harm to the West is rather small, and the whole point of sanctions is to accept harm to yourself if it hurts the other party and provides a deterrent.

Also, the Russian bond market is to a large degree a prediction market on how well Russia will manage its affairs. Russia is managing its affairs very poorly right now, and so its bonds are worth very little (as in, in default).

Discussions of acausal decision theory are straying into Philosophy SE rather than Politics SE, but it was in the interest of the West for "Russia invades Ukraine" to have been considered a failure condition for the Russia bond market; i.e. for the discount rate of Russian bonds to have been positively correlated with how likely investors thought it would be for Russia to invade Ukraine, or to do something in the same general category. This incentivizes investors to do their best to determine whether Russia would do so, and act in ways harmful to Russia if they determine they will, thus using capitalism to promote the West's interests.

  • No premise included- something you implied. Jun 29, 2022 at 23:11
  • How is it currently managing its affairs poorly? Jun 30, 2022 at 0:04
  • @AnotherPerson It has failed to ensure its participation in the global financial system, resulting in defaults. Jun 30, 2022 at 2:51

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