The international credit political structure is organized in such a way that almost every state borrows from some and replenishes the budget of other countries that are in the field of mutual interests with financial resources. At the same time, repaying the debt to the creditor with real money is a rather problematic matter. Large states often forgive debt obligations to countries that are not able to repay their loans and accrued interest on time. However, in world practice it is also common practice to “write off” debts, even very old ones. The Russian Federation is no exception.
Monetary debt is not always material
Most of the debts written off to other states are not represented by debts in the literal sense of the word. Since the financial resources, which were supposedly given in debt, never could ever go beyond the country giving the loan, and sometimes this money did not even exist materially. This is explained as follows: financial credit assistance is mainly given for construction, equipment, food resources that had to be bought from the creditor country, or for the construction of energy production and infrastructure development, which the creditor country firms should have done. It turns out that at the expense of others, the creditor country simply increased its GDP.
Why lend to countries that cannot pay?
In most cases, the Russian Federation issued financial assistance to other states for the purchase of weapons, food resources, or for the construction of various industrial, infrastructural complexes or agricultural facilities on the territory of states receiving funding. But why is Russia writing off debts to other countries? Weapons were produced in our country, food resources, too, and our craftsmen were also involved in the creation of industrial, infrastructure complexes or agricultural facilities with the supply of domestic equipment to these complexes.
Nuclear plant as an example of lending
An example is several nuclear power plants that were built on the territory of different countries by Russian specialists. These states took money loans from the Russian Federation for the construction of nuclear power plants, but the specialists in our country were engaged in the supply of building materials and the construction of the station, the enterprise was supplied with domestic equipment. Why is Russia writing off debts? After the construction and equipment of the complex, the Russian Federation also received a regular buyer of domestic fuel. This means that the funds of the creditor country did not leave. Weapons and food purchases are exactly the same.
Debt-free arming loans
Many countries have debts to the Russian Federation precisely for loans received for the acquisition of weapons. Naturally, the recipient states did not see the money allocated for the purchase of weapons for defensive or military purposes. They were sent to enterprises manufacturing military weapons that are located in Russia. The benefit is this: industrial enterprises get functioning, orders for the manufacture and modification of weapons come constantly, the purchase of consumables in the future.
Russia still carries out orders for the modification of military weapons, which were sold to other countries by the Soviet Union in the post-war years.
Food Procurement Credit Scheme
The situation is similar with loans for the purchase of food resources. Several countries on the African continent occupy a leading position in terms of debt to the Russian Federation in the procurement of food raw materials. States take money to purchase wheat, but don’t get finances in these countries, as raw materials are grown and bought in Russia or sold from the state reserve of the country. The benefit for Russia is this: there is constant support for their own agricultural producers, there is always a demand for goods, jobs are provided to farmers.
Reflection of bad loans on the domestic life of the country
In fact, all loan benefits are calculated as state assistance to their industrial institutions, from agricultural producers to enterprises in the energy and military sectors. This gives additional demand for the production of goods and stimulates the development of the industry. Many people think that it is better to send these huge amounts of money directly to the internal area of the economy, but they cannot understand that these actions really help the enterprises of the country's domestic market to develop.
Why and why Russia writes off debts to other countries
Debts are written off by mutual agreement of the creditor states, debtor states and third countries involved in this process. At the same time, each participant has a certain benefit, which can cost significantly more than the total amount of the fully paid loan. Russia writes off debts for several reasons.
It is almost impossible to completely get rid of debt obligations. For example, the Russian Federation is the assignee of the USSR, and the Union has other debtor states for which it is beneficial to consider that if the Soviet Union is no longer there, then there are no loan arrears either. Also, the debtor country may be affected by changes in the state system, be it a change of power during the revolution, division into several states, etc.
In this case, the debt can be replaced by different types of advantages for the country issuing the loan:
- profitable construction contracts;
- mining of natural resources;
- the conclusion of profitable economic agreements through which financial resources will pass;
- an agreement for the supply of high-quality Russian weapons both for warfare and for defensive purposes.
In such procedures, the creditor country can also make good money, and the debtor country provides its state with a constant sales market.
They are also inclined to write off debt financial obligations from states that are in the zone of interest of the Russian Federation, securing transactions that are advantageous to both parties, and establishing political influence in a certain area with the help of constant state funding. Financial assistance may be issued to underdeveloped states in return for supporting the political influence of the Russian Federation.
Credit debts are written off to maintain Russia's sustainable creditworthiness on the world stage. Some countries issue loans with lower interest rates, while other countries forgive financial debt. It is beneficial to states, but this may not affect the inhabitants of the country.
In normal practice, financial debt obligations are not transferred to other countries, but remain with creditors. This is due to the fact that for poorly developed in the political sense debt states, it is difficult to find a country that can pay the debt for it without harming itself. Therefore, writing off at least part of the debt, exchanging it for possible beneficial cooperation is a more profitable option.
Written off debts of Russia to other countries
Over the past twenty years, Russia has written off debts to other countries in the amount of approximately 140 billion dollars. This is if you consider only those loans that exceed $ 1 billion. So, further about what debts Russia wrote off. Which countries received essentially free aid? And how much has Russia written off debts?
In 1992, the written-off debt of Russia for Nicaragua to the USSR amounted to 2.55 billion dollars. The total debt is 3.4 billion, i.e. written off about 90% of the debt. In 2004, the state completely repaid the debt.
1996 year. The total debt of Angola to the Russian Federation is 5 billion dollars. The debt was written off by repaying a loan in the form of bills in the amount of 3.5 billion in 2016.
year 2000. Vietnam's total debt is just over eleven billion. Written off part of the amount of nine and a half billion. The payment of the remainder is deferred for 2016-2022.
year 2001. Of the 6 billion dollars. Ethiopia forgave 4.8 billion. In 2005, the country's debt was fully repaid.
2003 year. Mongolia wrote off 11.1 billion of 11.4 billion dollars. The country paid the remaining amount of three hundred million immediately after writing off the rest of the debt. Thus, the debt was fully repaid.
The same year. Laos. Of the 1.3 billion dollars. written off 960 million
2004 year. The debts written off to Iraq amounted to 9.6 billion out of 10.5. The head of state hopes that cooperation with the country will be in the interests of Russian companies.
2005 Syria's debt to the Russian Federation amounted to thirteen and a half billion dollars. Almost ten billion were written off. The country's leadership took upon itself the obligation to purchase weapons from Russia and to carry out the modification of armored vehicles.
2006, Algeria forgiven nearly five billion dollars.
2007 A little over eleven billion were written off from Afghanistan’s debt.
2008, of the nearly thirteen billion Iran, twelve were forgiven.
In 2008, Libya was forgiven four and a half billion.
In 2010, Mongolia was forgiven one hundred and eighteen million US dollars.
In 2012, with the DPRK 11 billion dollars. written off. The remaining debt worth more than a billion will be used in education, health and energy in the implementation of joint projects in the DPRK.
In 2013, Russia wrote off half a billion debt from Kyrgyzstan. 188.9 million were forgiven immediately, the second part of the debt of three hundred million dollars will be written off in equal parts over the next decade.
Why Russia wrote off the debt of Kyrgyzstan
In 2013, a law came into force in Russia that approved an agreement to write off a credit debt of Kyrgyzstan, according to which a debt of $ 188.9 million was forgiven to the country. But this is not the full amount of debt.
Kyrgyzstan remained owed to the Russian Federation another 300 million dollars. It was decided to write off this debt in installments, namely, $ 30 million each. in a year. At the same time, Kyrgyzstan accrued interest on financial debt, but in March 2016, interest accrual ceased. At the moment, out of 300 million dollars. 60 million debt was forgiven. In April 2017, the authorities regulating debt relations announced the start of negotiations to write off the remaining debt, instead of annually. The protocol established that after its signing by the parties, the country will remain absolutely indebted to Russia.
Russia wrote off the debt from Kyrgyzstan, explaining this by the fact that in this way it would provide assistance in the development of the republic.
Russia's debts for 2017 to other countries
Today, Russia's external debt to other countries is a debt to them, only remaining from the USSR. Due to the lack of freely circulating currency, which could be used to pay for goods and services provided by other countries, it was necessary to take loans from other countries.
State external debt of Russia
The external debt of the Russian Federation is calculated in dollar terms. It grew during the crisis, when the country could not pay off existing debts, took new loans, and interest was accrued on the old ones. Over the previous year, Russia's debt to creditor countries grew by 15.4% and amounted to almost six hundred twenty-four billion dollars. The largest debt Russia has to the US and the EU. He amounted to 125.3 billion dollars.
Plans for the repayment of external public debt for 2017
For 2017, Russia must pay a smaller amount than has already been paid before. This may be explained as follows:
- In 2017, the Russian Federation was able to save the positive difference between the size and price policy of exports and imports, and for the first half of 2016 this difference amounted to $ 74.7 billion.
- The state will finance the export of goods by paying off debt.
- Commercial debts will be replaced by bonded loans.
