Russian Default on Debt

The possible default of Russia on her debt has precipitated a crisis around the world, and coming at the same time as the Asian crisis, this may be a devastating second-tier of financial woe with effects far from Moscow. The Russian crisis has already affected investment in certain hedge funds and has frightened a number of analysts who realize what more could happen if the crisis is not resolved. Many Americans see Russia as far away and not related to American interests since the downfall of the Soviet threat, but this is not the case. The Russian crisis has already had an effect on the American economy and may have an even greater one. This may or may not be an argument for bailing Russia out, but it is certainly cause for some concern.

DEVELOPMENTS IN RUSSIA IN THE 1990S

Gorbachev brought about many changes in Soviet politics and society. In 1989 changes occurred throughout eastern Europe through a series of peaceful revolutions. The world then asked whether the Soviets would follow their satellites. New political alliances produced new tensions until Russia was declared independent and withdrew from the Soviet Union (McKay, Hill, and Buckler 1115-1116).

Observers note that Russia has been moving toward a market economy, though they wonder if the people will continue on this road. Official Russian statistics indicate that there has been a decline in production in state-run industries, but there has also been a rise in private-sector activities.

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st face the problems of a staggering debt and a devastated economy scarred by skyrocketing prices, unpaid wages, dwindling food supplies, and the threat of even worse to come as winter approaches. This comes as a new prime minister takes control and tries to find a way to cope with these issues. Analysts believe that how the Russian government tries to revive the economy will have a profound effect on its ability to get lenders to agree to restructure its debt. However, Russia has already damaged its credibility with foreign creditors by imposing the debt moratorium, making it doubtful that any new solution will involve additional money. Market purists are also reacting with scorn to the ascendance of Sovietera economic advisers as Prime Minister Yevgeny Primakov tries to assemble a new Cabinet, and these observes characterize Russia's new stewards as "Stalinist retreads who desire a larger role for the state in managing the economy and are ready to print money to ease the cash crisis" (O'Brien, September 15, 1998). The new regime's economic advisers want to preserve the strengths of the market while imposing tighter regulatory controls, and they further advocate reversing the government's move to effectively devalue the

Category: Foreign - R