Russian debt defaults are surging, with a quarter of the bond market at risk, while Putin hides in bunkers fixated on his war instead of the economy

The Russian economy is now shrinking, and businesses are having more trouble keeping up with debt payments, representing a potentially systemic threat to the country’s bond market. According to data from the central bank this week, GDP contracted 0.5% year over year in the first quarter, far below projections for 1.6% growth, due in part to an increase in the value-added tax the Kremlin imposed to pay for its war on Ukraine. That’s despite a series of rate cuts from the central bank, which has kept borrowing costs relatively high to fight war-related inflation. With economic activity slowing and rates still high, more Russian companies have missed debt payments. There were 11 technical defaults in 2024, 24 in 2025, and already 11 in just the first three months of 2026, according to Izvestia. Sources told the Russian newspaper that nearly 25% of the bond market is now at risk of default as businesses that borrowed at low rates must refinance at much higher ones. The volume of debt that needs to be rolled over this year is about double from last year, adding pressure on cash flows and raising competition for liquidity, according to the report, which cited a source that called the default problem a systemic trend. At the same time, the U.S.-Israeli war on Iran has increased logistics costs for Russian companies and stoked more inflation, reducing the central bank’s scope to lower rates further. Warnings have been building for months. Last June, Russian banks raised red flags on a potential debt crisis as high interest rates weighed on borrowers’ ability to pay off loans. Also that month, the head of the Russian Union of Industrialists and Entrepreneurs warned many companies were in “a pre-default situation.” The Center for Macroeconomic Analysis and Short-Term Forecasting, a state-backed Russian think tank, said in December the country could face a banking crisis by October if loan troubles worsen and depositors pull out their funds. Earlier this year