WHAT HAPPENED ON AUGUST 17?

By Valery Virkunen

Experts see the collapse of the system of state short-term bonds (GKOs) as the main reason for the escalation of the Russian crisis. After former Prime Minister Sergei Kirienko announced that the government was unable to meet its debts, thousands of participants in the financial market suddenly found themselves with no money. The collapse of the GKO pyramid brought with it the most serious financial and political shock to hit Russia since the post-Soviet reforms began.

It was not just professional participants–commercial banks, financial and insurance companies, various types of funds–which played the GKO market. From 1995 onward, companies, private investors and foreign organizations (nonresidents) were drawn into the GKO orbit.

THE MINISTRY OF FINANCE PAYS THE PRICE