Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

EDITORIAL: Time to End Blame Game Over Aug. 17




The new game in Russian politics is to pass the buck on the decisions that were taken on Aug. 17 to devalue the ruble, freeze payments on Russia's treasury bill debt and place a moratorium on repayments of certain private debt.


The new government immediately disowned all responsibility for the decisions. Then former Deputy Prime Minister Boris Nemtsov also cravenly distanced himself from his own Cabinet's actions. Soon even new Prime Minister Yevgeny Primakov joined in, claiming that not even President Boris Yeltsin himself was consulted on the matter. Yeltsin's spokesman now says the president knew about the decisions but was unaware of their full significance.


We are expected to believe that then Prime Minister Sergei Kiriyenko was solely responsible for everything that happened. The game is to turn him in to a scapegoat for all the nasty consequences of Aug. 17.


Maybe it would have been better to devalue earlier and use the International Monetary Fund's money to defend the ruble at a lower level.


But by Aug. 17 that was in the past. The essential facts were that by mid-August the Russian government lacked any funds to pay maturing treasury bills and the Central Bank could no longer afford to support the ruble.


The government had to do something. It is possible to argue that the exact mix of policies announced on that fatal day was not ideal f indeed they were probably quite flawed.


The most obvious question is why Kiriyenko simultaneously devalued the ruble and also defaulted on the treasury bill debts. Some argue persuasively that it would have been better to devalue and not default. With the ruble devalued, it would have been much cheaper to use foreign reserves and IMF money to pay off ruble debts.


Another issue is the lack of consultation with foreign investors on restructuring the treasury bill market.


And almost all economists would agree that the third key decision of Aug. 17 f to declare a moratorium on debt payments by private banks f was stupid since it failed to distinguish between solvent and insolvent banks. Moreover, why should the government get involved in the problems of private banks ?


All this can be argued. But it is just nonsense to claim that Russia had any easy choices.


Suppressing Aug. 17 like a bad dream does nothing to uncover the true causes of Russia's financial problems or start the search for answers.


Aug. 17 occurred because Russia was fundamentally sick financially. It was not just Kiriyenko's doing.