Timeline: The Bolsheviks to Putin: a history of Russian defaults

[Tyr-Ziu Saxnot]

https://news.yahoo.com/timeline-bolsheviks-putin-history-russian-110545282.html


Reuters
Timeline: The Bolsheviks to Putin: a history of Russian defaults


Jorgelina do Rosario
Wed, June 1, 2022, 6:05 AM
In this article:

Leon Trotsky
Leon Trotsky
Marxist revolutionary from Russia (1879-1940)

Andrey Vavilov
Russian politician
By Jorgelina do Rosario

LONDON (Reuters) - In 1918, Soviet revolutionary Leon Trotsky told Western creditors aghast at the Bolsheviks' repudiation of Russia's external debt: "Gentlemen, you were warned."

He reminded them that dismissal of Tsarist-era debt had been a key manifesto of the failed uprising in 1905. More than a century later, Russia stands on the brink of another default but this time there was no warning.

Few expected the Kremlin's invasion of Ukraine to elicit such a ferocious response from the West, which has all but severed Russia from global financial and payment systems.

These are Russia's major debt events over the past century:

1918: REPUDIATION

Just before the 1917 revolution, Russia was the world's largest net international debtor, having borrowed heavily to finance industrialisation and railways.

But seeing the Tsarist industrialisation drive as failing the working class, the Bolsheviks repudiated all foreign debt.

"They said 'we are not paying and even if we could, we wouldn't pay.' And that was a political statement," said Hassan Malik, senior sovereign analyst at Loomis Sayles and the author of the book "Bankers and Bolsheviks: International Finance and the Russian Revolution".

Despite Trotsky's reminder, the default shocked the world, especially France, whose banks and citizens suffered massive losses.

"Investors didn't take it seriously because they thought it would be so self-harmful," Malik said, estimating the debt to be worth at least $500 billion at 2020 prices and possibly more.

It took until the mid-1980s for Moscow to recognise some of that debt.

1991: USSR TO RUSSIA

Following the break-up of the USSR in 1991, Russia stopped servicing part of the overseas debt it inherited from former Soviet states.

Andrey Vavilov, Russia's deputy finance minister between 1994 and 1997, said the Russian Federation held around $105 billion in Soviet-era debt at the end of 1992, with its own debt amounting to $2.8 billion.

For accepting the inherited debt, the Paris Club recognised Russia as a creditor nation, Vavilov wrote in his book "The Russian Public Debt and Financial Meltdowns". And as Russia agreed with the group of nations to restructure $28 billion in debt in 1996, it was allowed to shift major Soviet-era debt payments to the next decade.

But with a financial crisis around the corner, it would take until 2017 to clear the Communist-era arrears.

1998: ROUBLE DEBT DEFAULT

By 1997, crashing oil prices slashed Russian export revenues. External debt, which stood near 50% of GDP in 1995, had swelled by 1998 to 77%, according to Vavilov, who blamed hefty IMF/World Bank loans for contributing to the pile.

Russia raised very little tax revenue and relied on short-term Treasury bills known as GKO to cover expenditure. But it found it harder and harder to roll these over and was soon spending ever-increasing amounts to defend the rouble.

"The more the government insisted that it would stand by the currency and repay its debts, the more investors concluded it was time to sell," said Chris Miller in his book "Putinomics: Power and Money in Resurgent Russia".

A month before the default, the IMF put together a $22.6 billion aid package, but "the market was expecting the announcement of an additional $20 billion," Martin Gilman, the IMF representative in Moscow at the time, wrote in his book "No Precedent, No Plan: Inside Russia's 1998 Default".

On Aug. 17, 1998, Russia threw in the towel, devaluing the rouble, announcing it could no longer pay rouble debt and introducing a three-month moratorium on some external debt.

Russian banks that had invested heavily in T-bills and had extensive foreign currency exposure soon went under.

2022: A FORCED DEFAULT

Through dire financial straits in 1998, Moscow made sure to continue Eurobond payments. Now it has plenty of cash but may not dodge default.

To sidestep sanctions, the Kremlin is suggesting foreign creditors open Russian bank accounts to receive payments in alternative currencies to the dollar.

Non-U.S. investors can in theory agree, but U.S. bondholders cannot, after a U.S. Treasury licence allowing them to accept Russian payments expired in May.

Miller, author of "Putinomics", said Russia would fight tooth and nail to dodge a Eurobond default.

"The officials on the central bank and the finance ministry have built their careers on restabilising Russia as a creditor that can be trusted in international markets," he said.

"It's built into their identity to make sure a default doesn’t happen again."

(Reporting by Jorgelina do Rosario, editing by Sujata Rao and Nick Macfie

Just how bad will it affect the rest of the world if Russia goes into default??
How badly would it hit USA... -- Tyr

[Tyr-Ziu Saxnot]

https://www.npr.org/2022/03/27/1089072525/what-a-russian-financial-crisis-could-mean-for-the-rest-of-the-world


DANIELLE KURTZLEBEN, HOST:

As the U.S. and its allies continue to impose harsh financial sanctions on Russia, the country seems to be nearing a financial crisis. As President Biden put it yesterday in a speech, the Russian ruble has been reduced to, quote, "rubble." Western companies have withdrawn their business. Russian banks have largely been cut off from the global financial system. And this past week, Biden pushed to exclude Russia from the G-20, the group of 20 leading economies.

We wanted to understand what an unstable Russian economy could mean for the rest of the world, so we called Adam Posen. He recently wrote a piece in Foreign Affairs magazine titled "The End Of Globalization?" exploring just that question. He's an economist and the president of the Peterson Institute for International Economics, a nonpartisan group that researches the global economy. When we spoke, I started by asking him to characterize the current state of the Russian economy.

ADAM POSEN: Quite bad, but not horrific. So they have had a sudden stop in access to various technological goods, luxury goods, consumer goods. The purchasing power of their home currency is much lower - a fraction, as you said, of what it was before. And so they're starting to feel real inflation, and they're also starting to feel some interruptions in their banking system and access to finance. But it's not yet a disaster. I mean, it's not yet Greece in 2008.

KURTZLEBEN: Let's turn to some of the countries that are imposing these sanctions, including the U.S. It seems that there's a delicate balance to strike when you're essentially casting Russia out of the global economy. On the one hand, countries imposing sanctions want to inflict pain and induce Russia to end its invasion. But on the other hand, they risk hurting their own economies and the global economy in the process. Is that more or less right?

POSEN: That is more or less right. Economics is always win-win, and - not always, but, I mean, generally in international trade at this scale. And so if you do something to a Russia or a China or a North Korea or a Cuba, you also do something back to yourself because you're foregoing opportunities. You're foregoing markets. You're foregoing what they have to offer. In this case, though, it's pretty asymmetric. Russia really only has to offer, in economic terms, its energy exports. And so Germany, Italy and a couple other European countries are really dependent on those energy exports. But almost everything else can be substituted for. And even those, as we just heard coming out of the G-7 and European Council meetings, the European countries are going to move very far away from Russian sourcing for energy as fast as they can.

KURTZLEBEN: Well, I want to talk about some of the practical effects of all of this. Last week, the Organisation for Economic Co-operation and Development, or OECD, released a report that concluded that this war will weaken global economic growth. By their calculations, growth will be 1.1% lower than if the conflict had not taken place. So I want to ask you, what does that look like in real life? Does it mean even higher prices, greater shortages of certain goods than a lot of people worldwide have right now?

POSEN: I think that's a number that's actually kind of misleading for the practical life for people you're talking about. It's not about global growth in some abstract way. It's about who's being deprived of what. So the Russian people are suffering. The Ukrainian people are obviously suffering. Normal people in northern and central Europe are going to have energy shortages and inflation. U.S. people are going to have a little bit more inflation. But the developing world, particularly in northern Africa and the Middle East, there are many of those countries, notably Egypt, that are very dependent on Ukraine for wheat, which is a huge part of their diet, particularly for poorer people. And it's not easy to substitute for that. There are poorer countries in Eastern Europe that are very dependent on Russia and Ukraine for energy, but also for selling their own goods, and that's going to go away. So where this is going to be felt is very different depending on where you live.

KURTZLEBEN: You make a point in your piece that the sanctions levied at Russia are pushing the U.S. and China further apart. Tell us why you think that is. Why is that happening?

[fj1200]

Just how bad will it affect the rest of the world if Russia goes into default??
How badly would it hit USA... -- Tyr

The rest of the world? Minimal. Wouldn't be surprised if most of any effect is soaked up by central banks.
The US? Nil. I don't recall any of the last 3 Russian crises since 1998 having any effect on us.

https://en.wikipedia.org/wiki/List_of_economic_crises

Your opinion may vary.

[Tyr-Ziu Saxnot]

The rest of the world? Minimal. Wouldn't be surprised if most of any effect is soaked up by central banks.
The US? Nil. I don't recall any of the last 3 Russian crises since 1998 having any effect on us.

https://en.wikipedia.org/wiki/List_of_economic_crises

Your opinion may vary.

That may be, but a lot has changed in the global banking system since 1998 and certainly since start of 1900..
Especially so with Russia, its finances/debts and its dependence on its exports of oil and gas.
I think should Russia default, a ripple would affect other nations that are already themselves in distress with their own finances
in this --new world-- (globalist) economy..
But I am myself far from being an expert in field.. -Tyr

[fj1200]

That may be, but a lot has changed in the global banking system since 1998 and certainly since start of 1900..
Especially so with Russia, its finances/debts and its dependence on its exports of oil and gas.
I think should Russia default, a ripple would affect other nations that are already themselves in distress with their own finances
in this --new world-- (globalist) economy..
But I am myself far from being an expert in field.. -Tyr

Not really. We've been a global economy for decades and we're only really touched by those crises that start here. Russia is a fairly bit player outside of anything beyond oil and gas and I doubt the balance sheet of any country is holding Russian debt and the banks are probably hedged by now. And if this is true and we're only talking about $20 billion (https://www.washingtonpost.com/us-policy/2022/05/24/treasury-russia-debt-default/) then there's not enough to make any kind of dent globally. And apparently we're taking steps that force them into debt. The eggheads might be wrong quite often but they wouldn't be risking a global crisis if there was much risk.