Russia prepares to pay off the last of its debt inherited from the old Soviet Union
Debt was mostly incurred during perestroika-era from 1985 to 1991, a time of failed attempts to reform the USSR’s dysfunctional political and economic system
A quarter of a century after the fall of the Soviet Union, Russia is finally set to pay off all the foreign debt it inherited from the vanished communist empire.
Keen to establish a reputation as a reliable borrower – despite Western financial sanctions over the Ukraine conflict – Moscow announced last week it would pay off US$125.2 million in Soviet-era debt to Bosnia-Herzegovina within 45 days.
[The payment] completes the settlement of the external public debt of the former USSR
“[The payment] completes the settlement of the external public debt of the former USSR, which is a historic event,” said Russia’s deputy finance minister Sergei Storchak.
In February, Moscow paid US$60.6 million to Macedonia.
After the Soviet Union’s collapse in 1991, Russia assumed responsibility for its foreign debt of some US$70 billion. This was mostly contracted during the difficult perestroika-era from 1985 to 1991, a time of failed attempts to reform the USSR’s dysfunctional political and economic system.
This commitment proved a painful burden in the 1990s as Russia faced catastrophic economic problems that culminated in a humiliating default on its foreign debt in 1998. But in 2006 – thanks to a steady influx of petrodollars since the early 2000s – Russia was able to pay off its debts to 17 major creditor-countries in the so-called Paris Club.
A payment of more than US$20 billion – or 95 per cent of the value of all Soviet-era loans – was made eight years after the 1998 default. Russia has also allowed itself the luxury of cancelling some country’s debts, with Cuba the latest in 2014.