The World

By Stefan Wagstyl, the FT’s eastern Europe editor

Among the many would-be borrowers planning to raise money from the capital markets before the current rally fades is the Russian government.

Alexei Kudrin, finance minister, has been talking to bankers and fund managers in London about a proposed bond issue to help finance Moscow’s yawning public deficit. He will not want to be reminded that the last time the Russian authorities tapped the market was shortly before its 1998 default.

Nobody is suggesting that the same could happen again – given the careful way that Russia has managed its accounts in the last decade, stashing away surplus oil and gas export revenues for a rainy day. But those reserves are draining away fast – hence Mr Kudrin’s visit.

One key element has changed little since 1998 – the country’s dependence on oil and gas. Repeated promises to diversify the economy have gone nowhere. The current crisis has clearly not been bad enough for Russia to force any serious policy changes. And now that oil has recovered to around $80 a barrel, up from near $30 earlier this year, the pressures are easing rapidly.

In the short-term, that is good for Russia – and will help in getting the bond away. But in the long-term, it delays the development of a diversified modern economy able to repay its bondholders whatever the financial climate.