June 28, 2022: -On Sunday, some Taiwanese holders of Russian Eurobonds have not received interest which is meant to be May 27 after a grace period expired, two sources said, potentially setting Moscow on track for its first major external sovereign default in over a century.

Russia was to make $100 million in coupon payments on two Eurobonds on May 27, $29 million on a euro-denominated 2036 bond, and $71 million on a dollar-denominated 2026 bond.

Western capitals imposed sweeping sanctions on Russia in the wake of its invasion of Ukraine on Feb. 24, and countermeasures by Moscow have all but severed the country from the global financial ecosystem. Russia is calling its actions in Ukraine a “special operation.”

Despite the plethora of curbs, Russia had made payments on seven bonds since its invasion of Ukraine before the latest interest payments.

Moscow has recently scrambled to find ways of marketing with upcoming payments and avoid default.

On Wednesday, President Vladimir Putin signed a decree to establish interim procedures and give the government ten days to choose banks to handle payments under a unique scheme, suggesting Russia consider its debt obligations fulfilled when it pays bondholders in rubles.

One of the Taiwanese references told Reuters that with the two Eurobonds in question, there was “no rouble clause attached.”

“The coupon cannot be paid in roubles instead,” the source added.

Russian debt makes up lesser than half a percent of Taiwanese bond holdings.

Moscow has been under threat of bankruptcy since its invasion of Ukraine saw Western forces freeze hundreds of billions of dollars of the currency reserves it held abroad and cut off large parts of its banking system from world markets.

The Kremlin has repeatedly said there are no grounds for Russia to default. Still, it cannot send money to bondholders because of sanctions, blaming the West for trying to drive it into an artificial bankruptcy.

While a formal default would be mostly symbolic, given Russia cannot borrow internationally at the moment and doesn’t need to, thanks to rich oil and gas revenue, the stigma would probably increase its borrowing costs in the future.