Enjoying ad-free content?
Since July 1, 2024, we have disabled all ads to improve your reading experience.
This commitment costs us $10,000 a month. Your support can help us fill the gap.
Support us
Our journalism is banned in Russia. We need your help to keep providing you with the truth.

Finance Ministry Proposes Reduced Payback on Soviet-Era Savings

The Finance Ministry has submitted a new proposal to the government that would slash the compensation payments promised to Soviet savers who saw their personal deposits wiped out in the 1990s, according to a report in Kommersant on Wednesday.

The proposed changes would overturn a law passed in 1995 by then-president Boris Yeltsin that committed the Russian state to a program of issuing new government bonds in compensation for lost deposits.

The bulk of the money affected by the Finance Ministry's proposal was originally on deposit with former national savings bank Sberbank  315 billion Soviet rubles, and former state insurance agency Rossgosstrakh  about 29 billion Soviet rubles, according to Kommersant.

To qualify under the 1995 law, savers' cash must have been deposited before October 20, 1991 —  the moment the radical market reforms were announced that triggered hyperinflation and wiped out the savings of millions of Russians.

But if payouts were to be made today at the level promised by Yeltsin in 1995, it would cause a financial "catastrophe," according to the Finance Ministry, and require a six-fold increase in state debt to 29.6 trillion rubles ($900 billion), Kommersant reported.

Instead, the ministry is proposing to use a lower coefficient for calculating the size of payouts (four modern rubles for one Soviet ruble rather than 85 modern rubles for one Soviet ruble), and abolish the open-ended commitment made by Yeltsin, finishing all payments by 2020, according to the newspaper.

Under the proposed scheme, the Finance Ministry will pay out 340 billion rubles ($10.3 billion) until 2020, an expenditure that is already priced into the government's budget calculations, Kommersant reported.

All other government ministries have agreed with proposal, Kommersant said, apart from the Economic Development Ministry, which argued the payouts under the plan were too low.

"We see the news as marginally positive, as it will effectively close this long-lasting issue with vintage USSR debt," analysts from Bank of America Merrill Lynch in Moscow said in a research note Wednesday.

Unlike other ex-Soviet states that only compensated their citizens for a fraction of what they lost during the turmoil of the end of the Soviet Union, Russia pledged to pay back everything. The government estimated last year that the public was still owed some 25 trillion rubles ($785 billion) in lost Soviet savings, Bloomberg reported.

Last July, the European Court of Human Rights ordered the Kremlin to pay compensation to pensioner Yury Lobanov for government bonds he bought in 1982.

… we have a small favor to ask. As you may have heard, The Moscow Times, an independent news source for over 30 years, has been unjustly branded as a "foreign agent" by the Russian government. This blatant attempt to silence our voice is a direct assault on the integrity of journalism and the values we hold dear.

We, the journalists of The Moscow Times, refuse to be silenced. Our commitment to providing accurate and unbiased reporting on Russia remains unshaken. But we need your help to continue our critical mission.

Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and you can be confident that you're making a significant impact every month by supporting open, independent journalism. Thank you.

paiment methods
Not ready to support today?
Remind me later.

Read more