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Here’s Just How Weird Some of Those Russian Bonds Really Are

Russian President Vladimir Putin chairs a meeting with members of the Russian government via teleconference in Moscow.

Russian President Vladimir Putin chairs a meeting with members of the Russian government via teleconference in Moscow.

Photographer: MIKHAIL KLIMENTYEV/AFP

Behold, a prospectus for euro-denominated bonds sold by Russia back in November of 2020 and due in 2027.

The prospectus includes 15 pages of risk factors, seven of which are largely dedicated to sanctions alone. In the words of Mitu Gulati, law professor at University of Virginia, they read as “a collection of Putin’s greatest hits—all of the activities that have led to the imposition of sanctions and might lead to even more sanctions in the future” including the incursion into Crimea and the targeting of opposition leader Alexei Navalny.

Risk factors like these are common in bond prospectuses, of course.

What’s less common are alternative payment clauses that allow the issuers to pay in another currency under certain circumstances. Allowing for such a thing would typically mean investors are taking on lots of foreign currency risk. In the case of Russian debt, they might end up with rubles instead of, say, dollars or (per this particular issue) euros.

And yet, these bonds were issued with just such a clause, setting out how Russia might be able to pay in rubles if, for “reasons beyond its control,” it can no longer come up with the foreign currency needed to make payment. Here’s the exact language from the prospectus: