Russia’s Failure to Pay Debts – Another Sign of Imperialist Dominance

Adam Smith, The ISL, RCIT in Israel/Occupied Palestine, 05.07.2022

It appears that due to Western sanctions, Russia has defaulted on its debt.

Because Russia wants to pay and has plenty of money to do it, he denied that this amounts to a genuine default, which usually occurs when governments refuse to pay, or their economies are so weak that they cannot find the money. “Everyone in the know understands that this is not a default at all. This whole situation looks like a farce.” Defaulting nations usually find it impossible to borrow any more money, but Russia is already in effect barred from borrowing in Western markets by sanctions.” [1]

Given the damage already done to the economy and markets, the default is also mostly symbolic for now, and matters little to Russians dealing with double-digit inflation and the worst economic contraction in years. But still, it’s a grim marker in the country’s rapid transformation into an economic, financial and political outcast. The nation’s eurobonds have traded at distressed levels since the start of March, the central bank’s foreign reserves remain frozen, and the biggest banks are severed from the global financial system.” [2]

Let us compare to the case of a semi colony failing to pay its debts:

“Meltdown in 2001/2002

Other problems soon became evident as well. Mexico’s financial crisis (the so-called “tequila” crisis) in 1994 had a contagious effect on other emerging markets which were believed to be running similar risks. Capital was fast withdrawn from Argentina too, so the country’s economy shrank by three percent in 1995. It recovered somewhat in the following years, but the situation was obviously instable. Inflation set in again. Due to the fixed exchange rate, the peso was soon overvalued, which further reduced the scope for exporting goods with high added value.

Problems escalated shortly after President Fernando de la Rúa was elected in 1999. His liberal alliance “Alianza para la Justicia, el Trabajo y la Educación” had defended the currency peg in the election campaign. Facing a decline of economic activity, a deep fiscal crisis and the growing flight of capital, the Alianza proved its incompetence by trying to maintain the convertibility at any cost. At one point, a government decree limited how much money people were allowed to withdraw from their bank accounts as the government tried to stem the outflow of capital. If people no longer have access to their money, a fixed exchange-rate becomes meaningless.

At that point, the International Monetary Fund (IMF) decided to withdraw its support. It had never been particularly keen on the currency peg, but it had appreciated economic policymaking in general. Lacking fresh money, the government had to declare default. Accordingly, the fixed exchange rate had to be abandoned, and people’s savings lost their value over night. The economy collapsed. Ever since, the IMF’s reputation in Argentina has been very bad. People remember that it had endorsed the market-radical approaches and that its withdrawal led to an economic melt down.

In the chaos of late 2001/early 2002, riots and looting rocked the country. The police killed at least 36 people. The established political forces were totally discredited an “Que se vayan todos” (may they all just go away) became the popular slogan. De la Rúa resigned, and three of his successors only lasted in office for a few days. The economy was in free fall. Soon it was almost a quarter smaller than in 1998. The share of urban people living below the poverty line went up to 57.5 %.” [3]

Greece’s Parliament approves unpopular new austerity measures, agreed to as a condition of the ongoing EU-IMF bailout. The legislation include layoffs of some twenty-five thousand public servants, as well as wage cuts, tax reforms, and other budget cuts. The approval opens the way for a new tranche of bailout funds worth nearly 7 billion euros ($9 billion), while labor unions call a general strike in protest.” [4]

While no doubt Russia has suffered economic damage, it is clear that it has not been brought to its knees, as would happen no doubt to a semi colony that dares to not pay its debt. This is another proof of Russia’s imperialist status.

Down with Eastern as well as Western Imperialism!






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