Well written but according to the allegations I;ve seen it would be a bit incomplete regarding regarding the US/Wests role in Russia’s problems in the 1990s. Focusing just on the Clinton admin and the IMF misses the involvement of private sector actors which was facilitated (it seems) by US government and int orgs, a notable case through the Harvard Institute for International Development (HIID) which was being co run by Larry Summers who was also in the Clinton admin at the time and was working on Russia stuff in both roles. Summers and HIID (while also partly directing official efforts through usaid) were working with Russian elites such as Anatoly Chubais, they used all of the above to line up major Western investments with corrupt Russian cliques, fueling crony capitalism and corruption. Much of this may not have occurred with out US involvement (both public and private combined with the private being necessarily enabled by the public) and this empowered the oligarchs that destabilized Russia’s economy
At least thats the allegation, as far as I know. But at the end of the day Russian problems were mostly sourced at home, but who knows, maybe if things had been handled differently by US then then maybe a different story would have played out there including politically over the long term. But I reckon as long as it was/is capital “G” Globalization that was being pushed, the paths are roughly set
So odd that people are willing to look back on the mistakes of Versailles without excusing Hitler, but American leaders can't approach this situation with an equal level of sophistication.
Russia took on Soviet debt because it took on Soviet assets, which were worth a lot more than the debt. Ukraine actually tried to take Russia to court in 2000 to rectify this.
Yes, this was the deal reached by Russia and the other former Soviet republics at Alma-Ata in December 1993 (which Ukraine signed), but the claim that Soviet assets abroad were worth a lot more than the debt is very dubious and in any case largely irrelevant.
The Soviet assets in question, besides embassies, consisted mainly in military bases abroad and debts by former Soviet clients in the third-world that everybody knew would never be paid back. What Russia needed for macroeconomic stabilization during the transition was cash and, not only did military bases in Vietnam or Cuba not generate any cash (except for corrupt Russian military commanders who illegally sold weapons and other materiel on the black market), but they actually cost money to Russia because it had to pay the salaries of the personnel it had over there and the maintenance of the facilities. So did the payments that Russia had to make to service the Soviet debt, which is why net official flows to and from Russia during that period were negative.
The fact that, in compensation for assuming the debt, Russia received Soviet assets abroad didn't help it achieve macroeconomic stabilization in any way. Again, what it needed was cash immediately available to cover the budget deficit, but assuming the Soviet debt meant that money was actually leaving Russia each year to pay foreign creditors. The main reason why Russia agreed to that deal with Ukraine and the other Soviet republics is not because Soviet tangible assets abroad were particularly valuable, again they were either worthless or a drain on the Russian budget for the most part, but because it wanted to keep the permanent seat the UNSC without having to get into a fight with the other Soviet republics.
In fact, Russia would have been on the hook for the whole Soviet debt even without the deal made in Alma-Ata, because earlier the Soviet republics had been bullied by the US into signing a so-called "joint and several agreement" that made each of them responsible for the whole debt if the others don't pay and in practice everybody understood that Tajikistan or even Ukraine were not going to pay if Russia didn't. It's to make Russia sign this agreement that US officials threatened to stop grain deliveries to Russia in the fall of 1991.
I notice you've added in the caveat "not abroad", but the point is that Soviet assets were largely held in Russia, like the gold you seem to think shouldn't have gone to pay the debt.
Russia could easily have borrowed off their assets but their elites were pocketing any and everything until forced, by monetary crisis, to stop being so totally useless and corrupt.
No foreign power could've saved them, though I don't know why I'm writing this given that I suspect you'll just add in another arbitrary caveat in order to change the nature of the question.
I only talked about Soviet assets abroad because that's what the deal Russia proposed to the other republics and that all of them except Ukraine eventually accepted. (I checked and I was wrong that Ukraine accepted it though, apparently it never ratified the agreement on the so-called "zero option", which presumably was the basis for the legal suit you mentioned.) Soviet assets in Russia were not concerned, because the principle adopted by the republics early on was to claim as theirs any Soviet assets on their territory, which is how for instance Ukraine was able to create the second largest military in Europe within the space of a few weeks after the August 1991 coup.
As far as I know, the only exception to that principle agreed by everyone was about nuclear weapons, which were supposed to be transferred to Russia. (After the collapse of the Soviet Union, Ukraine wavered for a few years about the transfer of strategic weapons, but eventually a deal was made and it happened.) Russia claimed another exception for the Black Sea fleet, but Ukraine never accepted that and it took years after the end of the Soviet Union to resolve the issue. It was tricky for the other Soviet republics to challenge the general principle, because it was the basis that it had used to claim Soviet assets on its own territory.
The Soviet Union had some gold reserves abroad, but presumably most of it was in Russia and in any case Soviet gold reserves in general, regardless of where they were physically located, were nearly depleted by the time the Soviet Union ceased to exist. Gaidar talks about that in his memoirs and it was also discussed in the press at the time, because the Soviet Union didn't publish the size of its gold reserves previously, so everybody was shocked when they realized after the coup that almost all of it was gone. According to Gaidar, whose figures are actually higher than those found in the Western press at the time, the reserves stood at 289.6 tons at the end of 1991.
I think it's pointless to discuss what a fair division of Soviet debts and assets should have been, because there is no obvious principle to decide that and in practice the breakup of the Soviet Union was totally improvised, so there was no time for the republics to reach any agreement on those issues. But that's irrelevant to the question I'm talking about here, which is whether Russia benefited during the transition from the deal according to which it assumed the entire Soviet debt in return for claiming Soviet assets abroad. This has nothing to do fundamentally with corruption in post-Soviet Russia, which nobody denies, although it was the same in Ukraine and most of the other former Soviet republics.
Again, most of the Soviet assets abroad were a drain on the budget and they were not liquid, so that deal clearly hindered Russia's efforts to achieve macroeconomic stabilization during the transition. Even if we consider the totality of gold reserves, not just the share held abroad, it only amounts to a bit more than $3 billion at contemporary prices, which is less than 1/20th of the total Soviet debt that Russia serviced alone in the following years. I know that Ukrainians like to complain about the "zero option", but it's perfectly obvious that it was better off not having to service its share of the Soviet debt during the transition in return for a share of Soviet assets abroad that again were not only largely worthless but actually were a charge on the budget.
The point is that the assets Russia inherited from the Soviet Union dwarfed the debt. Indeed, its debts were dwarfed even by its GDP. Just oil or gas or any other number of sectors would have been plenty as leverage for those small payments, but Russian production was so mismanaged it shrunk year on year from an already low base.
Of course the assets Russia had when the Soviet Union collapsed dwarfed the Soviet debt, the same thing was true for every other Soviet republic and in general is true of every country in the world for obvious reasons, but this didn't help them achieve macroeconomic stabilization because it's obviously not true that Russia or the other former Soviet republics could easily get loans during that period, no matter how much natural resources they had. In fact, they couldn't get loans immediately after the collapse, which is precisely why they turned to the IMF. This had nothing to do with their incompetence, but was a result of the situation they inherited. Even if Gaidar's team had managed to restore oil production to previous levels, which they obviously couldn't because the economy was completely disorganized by Gorbachev's reforms and they would have needed to import foreign equipment for which they lacked the hard currency anyway, it wouldn't have solved the problem given the low oil prices during that period. Honestly what you're saying makes no sense.
I don't care what's "fair". Just what would have worked and handing money to the elites that were somehow managing Russia into poverty, despite Saudi levels of natural resources, would have not worked! Only monetary crisis forced them into reducing their corruption and doing the basic tasks required to maintain a proper state. And the monetary crisis is solely their responsibility, not the responsibility of those who didn't somehow magically save them from their own grift.
The Russian government under Gaidar and his team actually carried out a very courageous stabilization program initially, unlike Ukraine which had a totally irresponsible fiscal and monetary policy immediately after the end of the Soviet Union, but in the absence of macroeconomic assistance from abroad it was politically doomed. This has nothing to do with their incompetence, they made mistakes obviously but they were highly competent, unlike the people that Yeltsin subsequently invited to join the government or the people in charge of economic policy in most other former Soviet republics at the time. What you're saying is just unhinged anti-Russian drivel to be honest. All the republics were left with a terrible situation when the Soviet Union collapsed that anyone would have struggled with and, except for the Baltic countries (who however did get macroeconomic assistance from Europeans), Russia actually did better than the others. But whatever it doesn't really matter if you think that foreign macroeconomic assistance wouldn't have made any difference. This doesn't change the fact that, contrary to what Nuland claims, the West didn't provide it. All this other stuff, in addition to making no sense, is irrelevant to the point I was making.
Oh my God, who cares. The Russians can't get their shit together and it's nobody else's problem. These endless complaints about people who objectively have been extremely generous towards Russia are ridiculous. It would have been much better for the rest of the world if they had all starved.
Great post. Would love to read another post about why Gorbachev's economic reforms failed.
This is often stated, but I've never understood why exactly they were bad. From the summaries I've read, the new laws sounded pretty similar to successful Chinese economic reforms. So why did one fail and the other succeed?
Well written but according to the allegations I;ve seen it would be a bit incomplete regarding regarding the US/Wests role in Russia’s problems in the 1990s. Focusing just on the Clinton admin and the IMF misses the involvement of private sector actors which was facilitated (it seems) by US government and int orgs, a notable case through the Harvard Institute for International Development (HIID) which was being co run by Larry Summers who was also in the Clinton admin at the time and was working on Russia stuff in both roles. Summers and HIID (while also partly directing official efforts through usaid) were working with Russian elites such as Anatoly Chubais, they used all of the above to line up major Western investments with corrupt Russian cliques, fueling crony capitalism and corruption. Much of this may not have occurred with out US involvement (both public and private combined with the private being necessarily enabled by the public) and this empowered the oligarchs that destabilized Russia’s economy
At least thats the allegation, as far as I know. But at the end of the day Russian problems were mostly sourced at home, but who knows, maybe if things had been handled differently by US then then maybe a different story would have played out there including politically over the long term. But I reckon as long as it was/is capital “G” Globalization that was being pushed, the paths are roughly set
So odd that people are willing to look back on the mistakes of Versailles without excusing Hitler, but American leaders can't approach this situation with an equal level of sophistication.
Russia took on Soviet debt because it took on Soviet assets, which were worth a lot more than the debt. Ukraine actually tried to take Russia to court in 2000 to rectify this.
Yes, this was the deal reached by Russia and the other former Soviet republics at Alma-Ata in December 1993 (which Ukraine signed), but the claim that Soviet assets abroad were worth a lot more than the debt is very dubious and in any case largely irrelevant.
The Soviet assets in question, besides embassies, consisted mainly in military bases abroad and debts by former Soviet clients in the third-world that everybody knew would never be paid back. What Russia needed for macroeconomic stabilization during the transition was cash and, not only did military bases in Vietnam or Cuba not generate any cash (except for corrupt Russian military commanders who illegally sold weapons and other materiel on the black market), but they actually cost money to Russia because it had to pay the salaries of the personnel it had over there and the maintenance of the facilities. So did the payments that Russia had to make to service the Soviet debt, which is why net official flows to and from Russia during that period were negative.
The fact that, in compensation for assuming the debt, Russia received Soviet assets abroad didn't help it achieve macroeconomic stabilization in any way. Again, what it needed was cash immediately available to cover the budget deficit, but assuming the Soviet debt meant that money was actually leaving Russia each year to pay foreign creditors. The main reason why Russia agreed to that deal with Ukraine and the other Soviet republics is not because Soviet tangible assets abroad were particularly valuable, again they were either worthless or a drain on the Russian budget for the most part, but because it wanted to keep the permanent seat the UNSC without having to get into a fight with the other Soviet republics.
In fact, Russia would have been on the hook for the whole Soviet debt even without the deal made in Alma-Ata, because earlier the Soviet republics had been bullied by the US into signing a so-called "joint and several agreement" that made each of them responsible for the whole debt if the others don't pay and in practice everybody understood that Tajikistan or even Ukraine were not going to pay if Russia didn't. It's to make Russia sign this agreement that US officials threatened to stop grain deliveries to Russia in the fall of 1991.
I notice you've added in the caveat "not abroad", but the point is that Soviet assets were largely held in Russia, like the gold you seem to think shouldn't have gone to pay the debt.
Russia could easily have borrowed off their assets but their elites were pocketing any and everything until forced, by monetary crisis, to stop being so totally useless and corrupt.
No foreign power could've saved them, though I don't know why I'm writing this given that I suspect you'll just add in another arbitrary caveat in order to change the nature of the question.
I only talked about Soviet assets abroad because that's what the deal Russia proposed to the other republics and that all of them except Ukraine eventually accepted. (I checked and I was wrong that Ukraine accepted it though, apparently it never ratified the agreement on the so-called "zero option", which presumably was the basis for the legal suit you mentioned.) Soviet assets in Russia were not concerned, because the principle adopted by the republics early on was to claim as theirs any Soviet assets on their territory, which is how for instance Ukraine was able to create the second largest military in Europe within the space of a few weeks after the August 1991 coup.
As far as I know, the only exception to that principle agreed by everyone was about nuclear weapons, which were supposed to be transferred to Russia. (After the collapse of the Soviet Union, Ukraine wavered for a few years about the transfer of strategic weapons, but eventually a deal was made and it happened.) Russia claimed another exception for the Black Sea fleet, but Ukraine never accepted that and it took years after the end of the Soviet Union to resolve the issue. It was tricky for the other Soviet republics to challenge the general principle, because it was the basis that it had used to claim Soviet assets on its own territory.
The Soviet Union had some gold reserves abroad, but presumably most of it was in Russia and in any case Soviet gold reserves in general, regardless of where they were physically located, were nearly depleted by the time the Soviet Union ceased to exist. Gaidar talks about that in his memoirs and it was also discussed in the press at the time, because the Soviet Union didn't publish the size of its gold reserves previously, so everybody was shocked when they realized after the coup that almost all of it was gone. According to Gaidar, whose figures are actually higher than those found in the Western press at the time, the reserves stood at 289.6 tons at the end of 1991.
I think it's pointless to discuss what a fair division of Soviet debts and assets should have been, because there is no obvious principle to decide that and in practice the breakup of the Soviet Union was totally improvised, so there was no time for the republics to reach any agreement on those issues. But that's irrelevant to the question I'm talking about here, which is whether Russia benefited during the transition from the deal according to which it assumed the entire Soviet debt in return for claiming Soviet assets abroad. This has nothing to do fundamentally with corruption in post-Soviet Russia, which nobody denies, although it was the same in Ukraine and most of the other former Soviet republics.
Again, most of the Soviet assets abroad were a drain on the budget and they were not liquid, so that deal clearly hindered Russia's efforts to achieve macroeconomic stabilization during the transition. Even if we consider the totality of gold reserves, not just the share held abroad, it only amounts to a bit more than $3 billion at contemporary prices, which is less than 1/20th of the total Soviet debt that Russia serviced alone in the following years. I know that Ukrainians like to complain about the "zero option", but it's perfectly obvious that it was better off not having to service its share of the Soviet debt during the transition in return for a share of Soviet assets abroad that again were not only largely worthless but actually were a charge on the budget.
The point is that the assets Russia inherited from the Soviet Union dwarfed the debt. Indeed, its debts were dwarfed even by its GDP. Just oil or gas or any other number of sectors would have been plenty as leverage for those small payments, but Russian production was so mismanaged it shrunk year on year from an already low base.
Of course the assets Russia had when the Soviet Union collapsed dwarfed the Soviet debt, the same thing was true for every other Soviet republic and in general is true of every country in the world for obvious reasons, but this didn't help them achieve macroeconomic stabilization because it's obviously not true that Russia or the other former Soviet republics could easily get loans during that period, no matter how much natural resources they had. In fact, they couldn't get loans immediately after the collapse, which is precisely why they turned to the IMF. This had nothing to do with their incompetence, but was a result of the situation they inherited. Even if Gaidar's team had managed to restore oil production to previous levels, which they obviously couldn't because the economy was completely disorganized by Gorbachev's reforms and they would have needed to import foreign equipment for which they lacked the hard currency anyway, it wouldn't have solved the problem given the low oil prices during that period. Honestly what you're saying makes no sense.
I don't care what's "fair". Just what would have worked and handing money to the elites that were somehow managing Russia into poverty, despite Saudi levels of natural resources, would have not worked! Only monetary crisis forced them into reducing their corruption and doing the basic tasks required to maintain a proper state. And the monetary crisis is solely their responsibility, not the responsibility of those who didn't somehow magically save them from their own grift.
The Russian government under Gaidar and his team actually carried out a very courageous stabilization program initially, unlike Ukraine which had a totally irresponsible fiscal and monetary policy immediately after the end of the Soviet Union, but in the absence of macroeconomic assistance from abroad it was politically doomed. This has nothing to do with their incompetence, they made mistakes obviously but they were highly competent, unlike the people that Yeltsin subsequently invited to join the government or the people in charge of economic policy in most other former Soviet republics at the time. What you're saying is just unhinged anti-Russian drivel to be honest. All the republics were left with a terrible situation when the Soviet Union collapsed that anyone would have struggled with and, except for the Baltic countries (who however did get macroeconomic assistance from Europeans), Russia actually did better than the others. But whatever it doesn't really matter if you think that foreign macroeconomic assistance wouldn't have made any difference. This doesn't change the fact that, contrary to what Nuland claims, the West didn't provide it. All this other stuff, in addition to making no sense, is irrelevant to the point I was making.
Oh my God, who cares. The Russians can't get their shit together and it's nobody else's problem. These endless complaints about people who objectively have been extremely generous towards Russia are ridiculous. It would have been much better for the rest of the world if they had all starved.
Great post. Would love to read another post about why Gorbachev's economic reforms failed.
This is often stated, but I've never understood why exactly they were bad. From the summaries I've read, the new laws sounded pretty similar to successful Chinese economic reforms. So why did one fail and the other succeed?
iNi ce and timely piecd, I appreciated the copious references.