Russia dips into Soviet playbook in bid to buy allies abroad
The Russian government is taking a page from the Soviet Union’s playbook as it seeks to grow the country’s global influence.
Annual export lending from the government is forecast to nearly double to $6 billion by 2022, the highest level in Russia’s modern history, according to a draft budget. The amount is about three times as much as developed countries lent on average in 2017, according to OECD data.
Export lending was a popular tool in the Soviet Union for spreading the superpower’s influence over poorer countries. Data on the total monetary value isn’t available, but Andrey Nechaev, an academic and former Russian economy minister, estimates that more than $100 billion was lent and most ended up being written off, including a $31.7 billion credit to Cuba.
“Economic ties strengthen political ties,” said Alexander Knobel, director of the Institute of International Economics and Finance at the Russian Trade Academy in Moscow. “In the Soviet Union there was a practice of handing out loans to countries who couldn’t pay back. We’re not seeing so much of that now.”
India, Belarus and Indonesia have all taken out loans in recent years to fund Moscow’s export of goods such as weapons and nuclear power plants. But the list of creditors also includes Venezuela, which was forced to restructure a $3.15 billion debt in 2017 amid a deepening economic crisis. The Latin American country has made its recent coupon payments.
Russia has written off $20 billion of loans to African countries to ease their debt burden, President Vladimir Putin announced Wednesday at a forum in Sochi. At the same conference two Russian banks signed an agreement to fund $5 billion of trade between Russia and Africa.
Export lending is a strategy that China pursues to fund infrastructure projects in Africa and other parts of the developing world to bypass the West’s political and fiscal demands. Chinese export lending to energy projects alone has averaged around $23 billion a year in the past decade, according to data compiled by Boston University.
Political influence aside, the lending boom is also a function of growing demand for Russian exports in the past three years, according to the Center for macroeconomic analysis and short-term forecasting, a Moscow based think tank. Agriculture, chemicals and pulp and paper are among top export growth sectors.
“Our exporters are finally starting to work at full capability and the Finance Ministry is responding to this acceleration,” Deputy Finance Minister Sergey Storchak said in a phone interview, without disclosing which countries Russia will lend to. “The use of loans will increase in the next budget cycle.”
Russia’s claims on foreign borrowers totaled about $39.4 billion as of May 1, according to a June sovereign bond prospectus. About a third of that was left over from the former Soviet Union after some countries agreed to repay their debts. The government’s total foreign debt was about $53.9 billion as of September.