Russia’s external debt has been falling for years now to around 15% of GDP – one of the lowest levels in the world – and with the concurrent relentless rise in hard currency reserves, it created a net surplus position of some $153bn as of the end of the first quarter. Before the war started Russia could have paid off all its external debt and still had over $150bn left in cash.  

After the sanctions on the Central Bank of Russia’s (CBR) gross international reserves (GIR) on February 27, now it can’t. Removing about $300bn from the spendable reserves and you are left with a deficit of just under $180bn. But even this is a low level of debt and the bulk of it is private, not public, leaving the government in a strong position.  

In the shorter term, in the run-up to the war the external debt began to rise again modestly in the second and third quarter of 2021 to peak at $490bn in September before starting to fall again, as the chart shows, to the last reported figure of $453bn as of the end of the first quarter.  

Of that debt, only $86bn was government debt and another $367.4bn was private debt, according to the CBR. Of the public debt some $40bn was in the form of Eurobonds.  

With nominal GIR of $614bn at the end of the first quarter that meant Russia began the war in Ukraine with a net $528bn surplus in cash if you ignore the private debt. Even removing the circa $310bn of CBR reserves frozen by the West from this, that still leaves the government with a surplus of $218bn, of which circa $134bn is in the form of physical gold and a bit less than $100bn in cash.  

Taking the more recent GIR total of $585.7bn as of May 13 as the total reserves and subtracting the $310bn of frozen CBR reserves as well as the sum total of public and private debt as of the end of the first quarter, that leaves a deficit of $177.3bn, or a net 12% of GDP, a very low level of indebtedness.  

Looking at the same reserves in May and subtracting only the public part of the debt and there is a surplus of $187bn – more than twice as much as is needed to preserve the stability of the currency, leaving the government in a comfortable cash positive position.  

Even taking into account an expected 15% contraction in the size of the Russian economy in 2022, that will still leave the Russian government with healthy surplus and a gross deficit – including public and private debt – of some 14% of GDP.  

These calculations do not take into account the circa $100bn of revenues the government has earned as a windfall from the super-high commodity prices, and especial oil exports, in the first quarter. However, at the same time reserves have fallen by $43.8bn since the start of the war rather than this surplus accumulating as fresh reserves.

As the CBR has stopped reporting trade and reserves numbers since the start of the war, it is unclear what happened to this circa $150bn but it appears to have been spent on the war, used to prop up state-owned companies and banks or disappeared oversees as capital flight.