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. Last Updated: 07/27/2016

Repaying a Debt of Respect

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The countries of the former Soviet Union are finding various ways to pay off debts to their citizens, including those who held accounts in Sberbank during the Soviet era. A few days ago, for example, Lithuania began the final stage of disbursements to Soviet Sberbank account holders.

Data from the Lithuanian Finance Ministry show that one-third of the country's population, or about 1.2 million people, have received payments totaling more than 3.6 billion litas ($1.35 billion) at a rate of 1 lita for one Soviet ruble. The law sets a ceiling on payments at 6,000 litas per depositor.

Lithuanians over 65 years old, the disabled and victims of political repression have already received their payments. The government is expected soon to compensate 80,000 retirees over the age of 60, and in March payments will begin to the remaining 420,000 Soviet-era Sberbank account holders, including those with "children's" accounts.

For 2007 alone, Lithuania has allocated 1.14 billion litas ($428 million) toward this goal. The greater part of that sum, 989 million litas, came from the 2006 sale of the government's shares in the oil holding Mazeikiu Nafta to the Polish company PKN Orlen. Total proceeds from that sale amounted to $851.8 million. All told, 85 percent of compensation paid to Sberbank account holders has been financed through the government's privatization fund rather than from tax income.

Lithuania is doing a better job than other former Soviet republics of settling old debts, providing better exchange rates, speedier payments and larger individual reimbursements. In 2006 the Ukrainian government allocated just 330 million hryvna ($65 million) to Oshchadbank, the successor to Sberbank, for settling debts to depositors. Along with money allocated to people who lost their shirts when state Gosstrakh insurance policies became worthless, Ukrainian compensation payments amounted to 600 million hyrvna ($118 million) last year. The average payment amounted to 50 hyrvna ($10) per person, with a 500 hyrvna maximum allowable payment to descendents of recently deceased policy and account holders. The Ukrainian government is prepared to pay a total of 132 billion hryvna ($26 billion) to its Sberbank account holders.

Estonia has offered its citizens an exchange rate of 1 Estonian kroon (less than 10 cents) for every 10 Soviet rubles held in savings. Azerbaijan is offering the best exchange rate among former Soviet republics -- $1 for every Soviet ruble up to a 2,000-ruble limit, and 50 cents for every ruble after that. Azerbaijan expects to finance debt payments through oil export income, but the process has yet to begin.

In this country, the law on compensation for losses in pre-monetary reform accounts was passed in 1995. The Finance Ministry said that from 1996 to 2006 the government had paid Sberbank account holders 146 billion rubles. That's an impressive figure, but compensation at the rate of 2 new rubles for one Soviet ruble was paid only to people over 72 years of age, those with serious disabilities, parents and caretakers of disabled children and people disabled since birth.

Retirees between 65 and 70 years of age were paid at a rate of one new ruble to one Soviet ruble. People over the age of 54, those with less severe disabilities and parents of conscripts killed on duty received initial compensation of 1,000 rubles. Under the Finance Ministry's plan, all Sberbank depositors will eventually receive 2 new rubles for every Soviet ruble in their accounts. The cumulative total debt for all such accounts has been calculated at 315 billion Soviet rubles, which at the current compensation rate totals 630 billion new rubles ($23.8 billion).

You could say the way a state compensates depositors for their Soviet-era losses is a measure of its respect for its citizens. Paying off these debts is a strong political tactic, but only if the sum is significant, as in Lithuania, where the average payment is nearly $1,200. This is especially poignant given that only Russia considers itself the successor to the Soviet Union, and therefore responsible for fulfilling obligations incurred by the Soviet state. And despite Russia's effort to minimize budget hardships by offering a modest exchange rate, and having fulfilled only 25 percent of its internal debt obligations to date, the reality is that 1 Soviet ruble could purchase four loaves of bread, and 2 new rubles -- only two slices. And not everyone is happy about it, either: In 1999 Anna Ryabykh from the Belgorod region, with the help of the European Court of Human Rights in Strasbourg, proved that her Soviet-era account of 11,674 Soviet rubles had a value of $24,300.

This comment was published as an editorial in Vedomosti.