26.03.09

There seems to have been a radical turnaround in the mindset of Russia's officials. They are no longer concerned about the prospect of Russian assets - even the largest and most attractive - ending up in foreign hands. Senior Deputy Prime Minister Igor Shuvalov said last week that the government won't prevent foreign creditors receiving shares in exchange for debts from Russian companies.

A mere six months ago, such a turn of events seemed entirely unacceptable to the government: it allocated $50 billion for refinancing the foreign debts of Russian corporations - this was one of the first major anti-crisis measures. VneshEkonomBank (VEB), instructed to distribute this money, managed to spend $11.5 billion of it, including a $4.5 billion loan to UC Rusal (Oleg Deripaska). Back then, it seemed like the crisis would be over by mid-2009, and there would be enough reserves to go around, and Russia's strategic assets must on no account fall into the hands of Western capitalists.

But now the government's economists are convinced that the crisis is serious and will last some time; money will run out fast, and the government can't afford to satisfy the appetites of all Russian companies (they have to pay $130 million to foreign creditors in 2009 alone; they owe a total of around $800 billion).

This change in priorities says a great deal. It's good that only $11.5 billion has been spent out of that $50 billion allocated for the oligarchs. But we should also remember the controversial decision to spend $150 billion on propping up the ruble's exchange rate, and equally controversial spending on keeping the banking system stable (1.5 trillion rubles in September and October - although economists say that the banking system had no objective need of these resources). It hasn't been a cheap lesson. But the most important thing is that this lesson is learned, and the government will no longer pay for its fears of expansion by foreign creditors.

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Source: “Vedomosti”