[from JRL, which anyone interested in Russia shiould be on]
Moscow Times
January 17, 2001
Some Debts Are Better Than Others
By Yulia Latynina
President Vladimir Putin has announced that pensions will be raised. At the
same time, Finance Minister Alexei Kudrin announced that Russia would not
make its full payment due on its Paris Club debts this quarter. The reason
for skipping payment is easily understood: Money for this purpose was not
allocated in this years budget. Of course, money for increasing pensions
was also not included in the budget, but they will be paid all the same
from unanticipated budget revenues.
It should be acknowledged that the Paris Club debt is one of the only debts
that our otherwise generous government seems reluctant to pay. London Club
debt, for instance, was drastically restructured: Before restructuring, it
amounted to $32 billion and afterward $41 billion. In connection with
this restructuring, these debts dramatically increased in value and those
insiders who knew about it in advance were able to make billions.
Debts racked up by Soviet foreign-trade organizations are similar to London
Club debt. These organizations were set up during the late 60s by the KGB
to finance Soviet-backed insurgencies and governments in third-world
countries. By the 70s, they were mostly used to launder money abroad for
Party insiders. By the 80s, they were laundering money for the KGB
leadership itself and in the 90s their debts were resold, goodness knows
where, through a network of offshore companies.
There has been much speculation that those companies were controlled by the
very government officials who were negotiating the restructuring of these
debts. All that is known for certain is that in 1994 these debts stood at
$5 billion and now, after resale and restructuring, they amount to more
than twice that, according to Kudrin.
The government has also promised to pay off the debts of the company
building the Moscow-St. Petersburg High-Speed Railway. Since everyone knew
that this company would not be able to pay its debts, its bonds were
selling literally for kopeks. Insiders who got wind of the governments
pending decision could (and did) make some easy money.
In addition, Prime Minister Mikhail Kasyanov has promised to pay $16
billion that the government owes to the military-industrial complex. These
debts were never included in the latest budget or in any previous budget
for that matter. They were "incurred" when these factories without any
state orders simply produced aircraft or tanks and then presented the
government with a bill. By now youve guessed that these hopeless debts too
could at one time be cheaply bought up and that the states decision to pay
brought hefty profits to those who did so.
So, what is the problem with Paris Club debt? After all, the government is
ready to pay off even debts that it never incurred.
It is, Im afraid, not very difficult to guess the answer to this question.
London Club debts and the others mentioned above trade freely on debt
markets. These bonds can easily be transformed into hard cash in the
pockets of government insiders. But Paris Club debt cannot be.
These debts are the only ones that Russias corrupt politicians do not owe
to themselves. Or, rather, to "their" banks, companies, offshore firms.
These debts are owed directly to Western governments. They do not trade on
the open market.
>From the point of view of Russian bureaucrats, that means that there is
absolutely no reason to pay them.
Yulia Latynina is creator and host of "The Ruble Zone" on NTV television.
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