On 16 August 1998 the credit rating agencies – Moodies, Standard & Poors and Fitch – all gave Russian Government bonds close to the highest investment grade rating.
While turmoil spread in Russia – including the theft of $5 billion in loans from the IMF and World Bank – market commentators insisted that it was ‘unthinkable’ that Russia would default on its sovereign debt.
On 17 August 1998 the Russian Government did indeed default on its debt.
The rating agencies did as they had for the Asian Financial Crisis a year earlier, slashed their credit ratings ex post. That’s the value of a credit rating – it tells you what happened in the past.
Skip forward 14 years, and Russia is awash in money from natural gas and oil. So much, that it can afford to waste $51 billion on a winter Olympic Games, more than the past 21 Winter Olympics combined.
Reports of waste and corruption are staggering. Yet despite the huge amount of money being thrown at Sochi, it seems that the town is ill prepared for the event.
It is also interesting to read of how many friends of Vladimir Putin have been awarded contracts.
Corruption has always had its place in Russia – which is seeking to be a member of the OECD – only its prevalence reflected the state of the economy. The oligarchs made their billions when Yeltsin (probably in a drunken stupor) privatised State-owned oil companies at a small fraction of their worth.
This transfer of wealth from the population to powerful friends of the ruler continues. Really not much has changed since Stalin was in charge.