In summer of 1989, Romanian dictator Nicolae CeauÃ…Å¸escu repaid Romania’s debt in full, and early. The ostensible reason was to make the country financially independent and free from the “economic imperiaism” of the West. At least part of the real reason was to give him a free hand to do as he wished domestically without outside pressure. It would also eliminate any leverage the West had over his economy and help ensure his regime’s survival. I was reminded of this, which Kaplan discussed in Balkan Ghosts, when I saw this:
Russia has struck a deal for early repayment of $15bn (Ã‚Â£8bn) of debt owed to the West since Soviet times. The money is owed to members of the Paris Club, a grouping of 19 rich lending nations. The move will help Moscow save $6bn in interest payments that would otherwise have been due by the year 2020.
The payment, which is due to be completed by August, comes four months after Moscow repaid its debts to the International Monetary fund. In total, Russia owes the Paris Club $44bn (Ã‚Â£24bn). This deal – the biggest debt redemption in the institution’s history – will cut that figure by about a third. Paris Club members include the UK, France, Germany, Japan, Russia and the US.
While there was a great deal of fuss made over the not-so-subtle takeoever of Yukos, keeeping Russia’s vast natural resources firmly under state control isn’t all that hard to understand from a Russian perspective. Russia’s biggest weapon today is its natural resources and mountains of cash from high oil prices. If it wants to reassert itself in geopolitics as a major player, Russia will need to control its own financial destiny.