Lenders fear Russia plans to default

Russia failed to make $362 million in payments on Soviet-era debt which was due at the end of 1998. In August Russia failed to pay hundreds of millions of dollars it owed to foreign governments, but this is the first time it has failed to pay private creditors.

David Sanger of the New York Times reports that US officials, the International Monetary Fund, and western bankers now fear a growing movement in Moscow to simply default -- and not even try to pay the country's massive debts.

Because of this, western banks led by BankAmerica Corp have not called the failure to pay an official default, even though it clearly is.

Sanger cites two possible lines of thinking by Russian finance officials. One is that technical default is simply a negotiating tactic to try to force the western banks to offer much better debt relief terms. But the other is that Russia has calculated that it will never get as much in new loans as it is paying in debt service, and that is really is better off simply refusing to repay -- even if it means no new loans.