Why does Russia have such a small debt (debt to GDP ratio) compared to the vast majority of Western countries?

Question

This chart shows that Russia has a very low debt/GDP value compared to most of the other major countries.

Quora answers indicate pure economical reasons (huge amount of natural resources and difficulty to borrow externally).

Question: is Russia's debt size so small due to economic reasons only or are there any political reasons for this rather abrupt debt reduction?

Side note: an example of political decision for debt reduction is given in this article

Romanian dictator Nikolai Ceausescu single-mindedly insisted on repaying, in the span of a few years, the debt of $9 billion owed by his poor nation to foreign banks during the 1980s debt crisis. Romanians were forced to live through cold winters with little or no heat, and factories were forced to cut back because of limited electricity.

Few other modern leaders would have agreed with Ceausescu’s priorities. The Romanian dictator’s actions are especially puzzling given that the country could presumably have renegotiated its debt burden, as most other developing countries eventually succeeded in doing during the crisis of the 1980s.

Answer 1

First there was the cold war, so "The West" wouldn't lend money to The USSR/Eastern Block. A few non-aligned countries would lend to the USSR (e.g., Kuwait, which was repaid in 2016) but many of those were third-world countries (i.e., not in a position to lend). The USSR would lend to "Red" developing nations, and to Cuba of course; similarly the GDR would lend to the USSR.

As Germany reunited after the fall of the Berlin Wall (late 1989), they were the mayor 'Western' creditor to the USSR, which then broke up into some 15 countries. There Russia inherited both all its foreign properties (think embassies), and all its debt (but it still threatens to call in those non-Russian debts, occasionally; see above reference). Then it teetered on the brink of chaos, lurching from crisis to crisis (four debt restructurings before 1998, hyperinflation, ...), until the world (i.e., the "Club of Paris") forgave all but $60 Billion of debts in 1998. See this Congressional research report noting that servicing its debt in 1998 would have cost 80--90% of the anticipated Russian federal revenue.

Thus they started from a relatively small debt, which Putin started paying in 2001 at the start of a resource boom; and you're speaking of a country with a vast wealth of resources (diamonds, metals, oil).

So basically, they have little debt because they've had little time to build it up. There's also the factor that as a new and potentially unstable entity, there would have been a reluctance with many to lend Russia money. For the same reason as there's been much reluctance to invest, given that your company may get suddenly kicked out or management may be threatened with takeovers etc. Blatant example: Shell losing control of the Sakhalin project after funding the whole startup, e.g. Fortune magazine's post-mortem.

Answer 2

Because of its recent economic boom.

There are two ways to reduce the debt/GDP ratio. Reduce the debt, or increase the GDP. Russia did the latter when it experienced a massive economic boom from 1999-2008. Normal economic growth is 3%, and borrowing usually keeps pace with this rate so the debt/GDP ratio stays about the same. But during an economic boom, when GDP growth exceeds 3%, it takes extraordinary borrowing to keep the ratio up. Russia experienced annual growth rates in the range of 6-10% for nearly ten years. That is a huge increase of GDP. There's simply no way that borrowing could keep pace, and it appears that borrowing indeed remained the same.

Compare this graph showing their economic growth to your own, and note where the GDP ratio drops. See how the drop in the debt/GDP ratio coincides with the large GDP growth rates?

Answer 3

Russia is not, by any means, “another Western country”. We could argue about the culture but its political and socio-economical structure and its history, both recent and less recent, are definitely completely different and the comparison implied in the graph simply does not make sense. Incidentally, high debt-to-GDP ratios are not limited to the west, Japan has a famously high debt, even compared to other mature advanced economies. But the Russian economy is neither of those things.

The fact that Russia has large natural resources that account for a big share of its exports (which you allude to incredulously in your question) is a simple, verifiable fact. If you visualise the same data compared to other petroleum-products exporting nations like Qatar and the UAE, you will see a very similar debt-to-GDP ratio in recent years. And troubled oil-exporting countries like Angola and Venezuela are even closer to Russia, with a broadly similar trajectory over the last three decades.

From that perspective, there is nothing left to explain: Russia is quite similar to its closest peers and any purported “political will” to do this or that is mostly window dressing. Whether or not reducing the debt-to-GDP ratio was explicitly an objective, it was made relatively easy or perhaps even unavoidable by the factors you identified (relatively high natural-resources fuelled growth and difficulties to finance itself).