Michael Allen, associate professor of political science, discussed the possibility of a Russian default on foreign debt in an article for The Conversation. In Russia faces first foreign default since 1918 – here’s how it could complicate Putin’s ability to wage war in Ukraine, Allen and co-author Matthew DiGiuseppe of Leiden University look at the challenges the Russian government faces in repaying Russia’s $40 billion national debt, half of which is owned by foreign investors. Allen and DiGiuseppe also explore what such a default would mean to the Russian war effort in Ukraine
While noting that Russia has plenty of cash to repay its debts, Allen and DiGiuseppe observe that U.S. sanctions have blocked Russian access to its foreign currency reserves as well as constricting Russia’s ability to convert rubles to dollars, thus increasing the likelihood of default.
Allen and DiGiuseppe’s research has shown that countries that have defaulted on their debts or have poor credit ratings find it difficult to build military capacity, though they also state that “default is not likely to alter the outcome of Russia’s war – or force Putin to make any unpopular trade-offs.”