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. Last Updated: 07/27/2016

Soros Loan Helped Pay Wages

American financier George Soros said Wednesday he lent the Russian government "several hundred million dollars'' to help it meet a deadline for back wage payments last summer, just a month before putting up nearly $1 billion for a stake in the country's largest telecom firm.

The Russian government, struggling with a drastic shortfall of taxes and other revenues, owed many months' worth of back wages and pensions to millions of state workers and retirees throughout the country.

"They were stuck,'' Soros said.

The loan "was to bridge a one-week period between the receipt of the Eurobond issue and the payment of wage arrears,'' Soros told reporters after a lunch with Moscow business leaders.

President Boris Yeltsin had set a July 1, 1997, deadline for paying off billions of dollars in pension arrears. It might have been the deadline for repaying back pensions, not wages, to which Soros was referring.

Banks lead-managing the Eurobond issue may not have been aware of the severity of Russia's cash crisis at the time, Soros said. Russia issued $2 billion in 10-year Eurobonds via J.P. Morgan Securities and SBC Warburg last June.

The Russian government managed to deliver on Yeltsin's promise in July, stretching its resources to the limit.

Soros said he gained "a very favorable'' interest rate on the loan, but refused to elaborate on the transaction.

But when a deadline for repaying back wages came up in December 1997 and the government again turned to Soros, the financier turned them down.

"I didn't want to make a habit of it,'' he said.

Less than a month after the loan, Soros made an investment of almost $1 billion as part of a consortium which won a 25 percent stake in state telecoms holding company Svyazinvest, which was sold at a government auction.

Svyazinvest holds major or majority stakes in almost all of Russia's regional telecom companies, as well as long-distance carrier Rostelekom.

Soros said he had been surprised by the vocal protest among the Russian financial industrial groups that did not win the bid, and went on to warn that the country's financial oligarchy is flirting with disaster due to its infighting over government assets.

He likened top bankers scrambling to divide state assets to seven men in a boat approaching a waterfall.

"They were so busy fighting among themselves, they didn't hear the waterfall."

It is that infighting that Soros said has led him to doubt the wisdom of participating in the Svyazinvest auction.