Russia’s government crisis ended as it began: with the successful placement of a Eurobond on the international capital markets.
The theatrics that ended with Prime Minister Sergei Kirienko’s confirmation as prime minister last week did not prevent the Russian government from placing a 500 billion lira ($280 million) Eurobond issue on European capital markets on April 21. The issue, which has a 9 percent annual yield and matures in 2003, was oversubscribed, so the government decided to raise its value on April 24–the day of Kirienko’s confirmation–to 750 billion lira. The issue’s placement was a fitting follow up to Russia’s previous Eurobond–a DM 1.25 billion ($698 million) emission that was gobbled up by investors on March 24, the day after President Boris Yeltsin dismissed the Chernomyrdin government.
In addition to underscoring the apparent disconnect between Russian politics and economics, Russia’s lira-denominated Eurobond also highlights the inevitability with which European Union financial markets have come to view next year’s introduction of the euro, the single European currency. While Italy’s history of financial instability would have kept bond issuers away as recently as a year ago, Rome’s successes in meeting the criteria for entry into the EU’s Economic and Monetary Union have given Italy the EU’s financial seal of approval. Russia’s lira-denominated Eurobond reflects the belief that, by next year, there will essentially be no difference between lira-, deutsche mark-, and euro-denominated financial assets. In over-subscribing Russia’s latest Eurobond offer, then, the international capital markets are betting not only on the Russian economy, but also on Europe’s prospects for attaining “an ever closer union”. (Russian agencies, April 21, 24)
TRADE AMONG CIS COUNTRIES RISES, BUT OVERALL TRADE FALLS.