Bloomberg reports: Brezhnev Bonds Haunt Putin as Investors Hunt $785 Billion - Bloomberg
"25 trillion rubles ($785 billion), equal to almost half of Russian
economic output, the government says it still owes the public from lost
Soviet savings. Putin is stalling, most recently signing an order in
April to halt payments on the notes until at least 2015. Now, armed with
court rulings, veteran speculators are joining pensioners in seeking to
cash in. "
This represents a serious fiscal problem for Russia. Defaulting would cause harm to a large number of Russian citizens, so it is not really an option.
Another quote from the Bloomberg report:
“This all should have been settled back in the 1990s,” said Boris
Kheyfets, a Soviet debt specialist at the Russian Academy of Sciences’
Institute of Economics in Moscow. “How do you assume a debt that huge?
It would collapse everything immediately.”
Defaulting was and is extremely damaging to a country's fiscal situation. That's why Russia didn't repudiate these debts back in the 1990's. However, since the government isn't fully paying interest on these as time passes, technically they are already in default. The Finance Ministry is quoted in the report as follows:
“Clearly, implementing this plan to restore the public’s savings would impose exorbitant obligations on the federal budget,” the Finance Ministry said in its most recent debt strategy report,
released a year ago. “Were that actually to happen, the state would be
deprived of the ability to pay for other expenses for an extended period
That's clearly accurate.