Russia has signed an agreement with the government of Nepal for the repayment of a $US1.16 million Soviet-era loan.
It is not clear why Russia is bothering to collect such a small, old debt. But given Russia’s troubles — its currency has collapsed along with its economy, and Russia’s own foreign debts are now crippling it — and the mercurial nature of president Vladimir Putin, it is temping to read the Nepal agreement as a sign of … something.
The landlocked nation of Nepal, which became a republic in 2008 after almost half a century of rule by monarchs or a ruling family, remains one of the world’s poorest countries, with a GDP per capita of $US694.10. It suffered from a decade of civil war after Maoist rebels took on the monarchy under King Gyanendra, which only ended last November when a peace deal was finally signed.
Its relationship with the Soviet Union began in 1956, three years before the US set up an embassy in the capital Kathmandu. According to US diplomatic cables from the time, by June, 1958, the Nepalese King Mahendra had agreed, in principle, to accept Soviet economic aid. Now the Russian Finance Ministry wants the country to pay back its debt.
Yet it’s unclear why it has taken the decision now. Russia is significantly richer than Nepal with per capita income at around $US14,600 in 2013, according to World Bank data.
The move could be seen as part of a trend of Russia leaning on its debtors in order to raise funds as the country’s economy suffers in the wake of the collapse in global oil prices and Western sanctions over its role in the ongoing Ukraine crisis. Earlier this month Russian president Vladimir Putin said that Ukraine should repay a $US3 billion loan because Russia needs that money to fight the economic crisis that’s currently ravaging the nation, reports Bloomberg’s Anton Doroshev.
However, the tiny size of the Nepal loan relative to the Russian economy makes this move look decidedly odd not least as the country still has some $US368 billion in international reserves in its coffers, the majority of which is held in dollars and euros. It should already have enough to take care of its damaged economy — for the time being at least.
Perhaps then this loan recall from Nepal is just a shot across the bow for its larger debtors. Russia is simply saying: It may soon be time to pay up.