Shadow of Old Soviet Bonds Falls Over Russia

To meet the old regime's obligations, the country must scratch together $785 billion

Soviet bonds issued in 1982, Leonid Brezhnev's final year in power, are threatening the finances of Vladimir Putin's Russia. Investors and pensioners are pushing Moscow to honor its mid-1990s promise to account for Soviet-era pension guarantees and other liabilities, including bonds. There are no public records describing the exact number or value of the bonds sold, but the government estimates that it needs 25 trillion rubles ($785 billion) to account for what remains of the Soviet balance sheet. That liability equals almost half of Russia's economic output and would boost government debt nearly tenfold, according to Vladimir Osakovskiy, chief economist at Bank of America Merrill Lynch in Moscow. Although Putin has stalled redemptions of Soviet bonds, most recently in April with an order to halt payments until 2015, recent international court rulings have given bondholders fresh ammunition to pursue claims.