Taiwanese insurers hit by Russia debt default

Seven Taiwanese insurers have not received interest from Russian Eurobonds that was due on May 27, the territory’s financial regulator said.

For the first time in over 100 years, Russia defaulted on its international bonds after a grace period lapsed on Sunday evening, Reuters reported. The sanctions placed on Russia for its invasion of Ukraine in February have isolated it from most of the global financial system and placed a huge strain on its economy.

The missed payments totalled US$100 million across two bonds, denominated in US dollars and Euros each. The bonds were due on May 27, with a 30-day grace period that lasted until Sunday.

According to the report, Russian debt makes up only a portion of overall Taiwanese bond holdings, which means investors are mostly unaffected by the default.

The Kremlin and the finance ministry pointed fingers at Euroclear, saying that Russia is honouring its obligations, but the international clearing house was not processing its payments.

On Tuesday, the Russian government was asked whether it would be suing Euroclear or other Western financial intermediaries involved in the transaction. In response, Kremlin spokesperson Dmitry Peskov said, “This question should be analysed by our lawyers, our financial institutions.”

Alexander Afonin, head of debt market analysis at Moscow-based Sinara investment bank, estimated that foreign investors hold between 15% and 20% of Russian sovereign Eurobonds. He said that bondholders may call a default on Russia themselves if a certain quorum is reached. However, this would be unlikely as most bondholders are Russian investors.

Russia uses the EU-sanctioned National Settlement Depository to pay domestic investors on sovereign Eurobonds.