, the privatized monopoly that produces over 80% of Russia’s electricity, brought to light some figures that show how severe the payments crisis is, and how difficult it will be to solve.
Customers of UES in the fourth quarter of 1997 paid cash for only 13% of the product they received. The rest they kited or paid either with veksely (promissory notes for which there is a lively secondary market), or with debt swaps (that is, with someone else’s promissory note or similar instrument). UES passes its losses on, and then some. Customers owe UES about $1.4 billion, and UES and its subsidiaries owe energy suppliers $3 billion and the federal government $3.5 billion in taxes. It appears that the non-cash transactions go untaxed.
The system is entrenched. A government commission found that the country’s 210 largest tax debtors, who owe the government almost $12 billion, barter about three fourths of their business and take cash for the remainder. Winding down the barter system will require an overhaul of the country’s financial institutions and some kind of final clearance of the circle of informal debt paper that substitutes for bank credit and cash. In the meantime, it is hard to have much confidence in the government’s ability to collect taxes, manage its budget deficit, or restrain the growth of public debt.