Russia faces huge problem

[RusskiSoldat]

... in the spending of money!

Russia Pays Final $21.6B to Paris Club

By ALEX NICHOLSON AP Business Writer
© 2006 The Associated Press

MOSCOW — Russia paid off the last of its Soviet-era debt to the Paris Club of creditors Monday, a highly symbolic move that underscores how much oil and natural gas revenue has done for the nation's economy eight years after it went into default.

The Finance Ministry said in a statement that it had transferred the last tranche _ $21.6 billion _ to the club's 17 members.

In a separate announcement, Russia's state-owned foreign trade bank, Vneshekonombank, said it had transferred $23.7 billion over four days in order to convert the tranche into nine different currencies. The higher figure includes a $1 billion penalty for early repayment, as well as money for currency fluctuations.

As a result, Russia stands to save $7.7 billion in interest payments overall from the early retirement of the debt, which the government plans to spend on infrastructure projects. In May 2005, Russia paid back $15 billion.

"The early settlement with creditor countries was possible thanks to the Russian Federation's growing financial and economic might," the ministry said. Early payment "would strengthen Russia's international authority," it said.

The deal itself was brokered in June _ a public relations coup ahead of the Group of Eight summit, which Russia hosted in St. Petersburg in July.

After relying on foreign loans for much of the 1990s and defaulting on its sovereign debt almost exactly eight years ago, Russia's finances are in good health, thanks to record world prices for oil and gas _ its main exports.

In the six years since Vladimir Putin became president, Russia has earned hundreds of billions of dollars from oil and natural gas sales.

A budget surplus of $56 billion is projected for next year, hard currency reserves are the third-largest in the world at $277 billion and the economy is growing at a healthy clip of 6 percent to 7 percent annually, transforming the once-dour capital into a gaudy, glitzy boom town.

"Eight years ago, the problem was how do you pay back the debts when you don't have the revenues. Now the question is: how do you spend this money without it being inflationary," said Roland Nash, an analyst with Renaissance Capital investment bank in Moscow.

"It's a fantastically different problem to the one they had eight years ago," he said. "Who would have guessed they would have this metamorphosis?"

So we have gone from the most indebted country in the world to a debt free one with the third largest money reserve!
Russia grows richer and richer by the year, and now has time for all sorts of auxiliary projects, like the restoration of classical era buildings in St. Petersburg and reform of the army.
The streets of Moscow light up with neon advertising casinos, malls and entertainment complexes all over, a far better sight than mass store closings and general gloomyness of just 8 years ago.
Best post-Soviet results I've seen to date.
On a city by city basis, only East Berlin had a boost comparable to Moscow and St. Petersburg due to loads of western money poured into it.
Far lesser problem: Sankt Peterburg is not a name I can support because of it's western roots, they should do what they did in 1914 and rename it Petrograd.

Oh, as to avoid spamming the forum, I will keep all my Russia related news in this thread.

[vikrant]

well good for u

i can solve ur problem
spend all the money for the poorer countries
help them to develope
then definitely russia will get leadership of newly developed countries
then perhaps russia can again act as s counterbalance against america

[Artemas Ward the XXIII, Esquire]

Good job Russia.

[Last Roman]

Now if only the US would follow suit.

And I think St. Petersburg sounds much better than Petrograd. Who cares if it comes from the west? (Besides, I count European Russia as part of the west)

[Red Harvest]

Now if only the US would follow suit.

Egads, NO! I would like for us to stop adding to our debt, but I don't think anyone would like for us to default the way Russia did. Be careful what you wish for...

[Last Roman]

Egads, NO! I would like for us to stop adding to our debt, but I don't think anyone would like for us to default the way Russia did. Be careful what you wish for...

I mean I wish we would pay off our debt. I guess I didn't read the full article

[KaerMorhen]

Good luck to you then, Moscow and Petrograd are amazing cities with lots of interesting places to visit indeed. Don't get me wrong because I really do wish you best, but Russia is very, very big and has lots of problem as well. It must take decades to have equal level of living standards as UK. Maybe your economy is growing again, you said Russia grows richer and richer by the year, can you say the same about averange Russians?. I have close friend of mine living in Voronez and he is not so enthusiastic as you in that matter.

[Titus Andronicus]

then perhaps russia can again act as s counterbalance against america

I think I prefer Bush' global terror to Putin's and Lukashenka's democracy.

[Sidmen]

If russia did start acting as a counterbalance to the US again, verry little would change. We'd just have to go back to using proxy armies to fight our wars. (korea, vietnam, afganistan)

[Red Harvest]

Russia has been using oil and gas as a bludgeon with several of its neighbors. Plus it has "re-nationalized" some assets. In a period when oil has tripled in value, it would have been shocking if they weren't raking in a rather large windfall.

[Wild Bill Kelso]

Well since there is such a large surplus, perhaps it can be spent cleaining things up in say the republic of Tuva, where the common people are still being affected by things such as old asbestos mines and other relics of the communist era. They are as much a part of Russia as anyone in Moscow is.

[RusskiSoldat]

But unfortunately they're in an isolated place in the far east.
And I'd put the restoration of St. Petersburg as a higher priority than the restoration of Tyva, if only because the city has seventeen times Tuva's population.
As for Moscow, I doubt government funding is responsible for much construction of malls, movie theatres or stores, in capitalism the private companies do it.

[dragases1453]

Great for Russia...I think Putin is an intelligent person even if a bit too autochratic...

[Bwaho]

So we have gone from the most indebted country in the world to a debt free one with the third largest money reserve!

nice one... in contrast with your nemesis USA who is heavily in debt.

Great for Russia...I think Putin is an intelligent person even if a bit too autochratic...

yeah he seems clever, but like you say he will take "questionable" measures to get result... but maybe that's what russia needs at the moment. I hear is pretty popular with the people too.

[RusskiSoldat]

His 70% win in the election was not rigged.
That should be a testament to his popularity.

[Last Roman]

I hate to deviate this thread, but what amount of oil reserves does the US have compared to Russia?

[Red Harvest]

I hate to deviate this thread, but what amount of oil reserves does the US have compared to Russia?

20 billion barrels estimated versus 60 billion barrels.

[ENSAIS]

Quote from your own intro:
MOSCOW — Russia paid off the last of its Soviet-era debt to the Paris Club of creditors Monday, a highly symbolic move that underscores how much oil and natural gas revenue has done for the nation's economy eight years after it went into default.

Nobody said that countries with large oil and natural gas reserves that are willing to exploit them (unlike the US for environmental concerns) aren't making a killing due to skyrocketing fuels costs.

Last year oil was 32-35$ a barrel, 28$ a barrel just a few years ago, now routinely 60-70$ a barrell. That is called a windfall. And when a large section of your cash economy comes from commodities that have doubled in value in 18 months, it is hardly surprising to see surpluses.

All this proves is that middle east and Venezuelan hostility to the US and any other associated factors that create instability in oil and natural gas markets directly help Russia's economy. Congrats... at least it's helping somebody...

[RusskiSoldat]

What's your point?

[ENSAIS]

What's your point?

Let me elaborate:
Russia is doing well financially because the US is at war, which is driving up oil/natural gas revenue--and Russia's "growth" is largely just the doubling of the value of it's oil/ natural gas revenues.

Ergo, Russia has an post-cold war economic stake in failure of US foreign policies, and in a continued state of tension in the middle east and other oil exporting areas.

At the same time, China has exploited communist sympathies and hate for US foreign policies in Venezuela to secure exclusive energy deals there... oh and with Iran.

SO finally: I am pointing out the geopolitic connection among general tension in the middle east, and Russian and Chinese positions on nukes for Iran [that is, they blockade any meaningful actions against Iran, which keeps the status quo: higher oil $$$ for Russia, special energy pricing for China, and the decrease in US hegemony]

Without writing an opus, hopfully that states my points and gives some context to this windfall of Russian wealth?

Like I said, at least some one is benefiting from US foreign policy difficulties.