| February Revolution 1917 | MR Online

Russian debt repudiation, 100 years on: February 10, 1918 to February 10, 2018

Originally published: CADTM on February 10, 2018 (more by CADTM)  |

On 10 February 2018, we celebrate the centenary of the repudiation of illegitimate debts by the soviets on 10 February 1918. Translated for CADTM by Christine Pagnoulle with Vicki Briault.

2017 marked the centenary of the Russian revolution, the first revolution in history to overthrow capitalism with an international socialist revolution as a wider perspective, a revolution which prompted huge expectations for all those who, on a global scale, suffered the violence of capitalist exploitation, colonialism and war. The revolution in Russia was attacked by the proponents of the imperialist order and, after a gradual phase of distortion and bureaucratic degeneration that had started quite early, it was choked and suppressed by the Stalinist dictatorship.1

Yet its beginnings had held great promises: the revolutionary power established in Russia in October 1917 was able to implement some of the main popular demands, such as peace, the distribution of land to peasants, the nationalization of banks and the cancellation of peasant debts towards them, the effective recognition of the right to self-determination of peoples, the affirmation of women’s rights or the eight-hour working day.

2018 is thus the centenary of several achievements of the Russian revolution. One of them, which is often ignored, is the fulfillment of a promise made by the Russian revolutionaries in 1905: by a decree published in the official journal on 10 February 1918,2 all debts contracted by the Tsarist regime that had been overthrown some eleven months earlier were cancelled. The same applied to debts contracted by the provisional government between the fall of the Tsar and the October 1917 revolution, as they further mobilized public money for the purpose of waging war, thus perpetuating a situation of violence and hardship while the people demanded peace.

| Demonstration by women in Petrograd on 1917 February 23 | MR Online

Demonstration by women in Petrograd on 1917, February 23.

The debt repudiation had been announced and accounted for as early as 1905

| Leon Trotsky arriving in Petrograd on May 1917 | MR Online

Leon Trotsky arriving in Petrograd on May, 1917.

In December 1905, the St-Petersburg soviet3 published a call known as the ‘Financial Manifesto’,4 in which they exposed the illegitimacy of debts contracted by the Tsar and announced that they would not be acknowledged once the autocratic regime would be overthrown.

The manifesto took account of the extreme distress of the population as a result of the economic policies adopted by the Tsar’s government, which was “behaving within the frontiers of its own country as though it were ruling conquered territory.” Those policies were not aimed at developing the country, but at enriching a tiny privileged minority, strengthening the coercive power of the Tsar and waging wars of conquest (Tsarist Russia had just been defeated militarily by Japan).

The manifesto says:

The government is on the brink of bankruptcy. It has reduced the country to ruins and scattered it with corpses. The peasants, worn out by suffering and hunger, are incapable of paying taxes. The government gave credits to the landowners out of the people’s money. Now it is at a loss as to what to do with the landowners’ mortgaged estates. Factories and plants are at a standstill. There is unemployment and a general stagnation of trade.

Through this manifesto the revolutionaries denounced the way the State’s loans and revenues were used:

The government has used the capital obtained by foreign loans to build railways, warships and fortresses and to store up arms…. For many years the government has spent all its state revenue on the army and navy. There is a shortage of schools. Roads have been neglected. In spite of this, there is not enough money even to keep the troops supplied with food…. The government has pilfered the savings banks, and handed out deposits to support private banks and industrial enterprises, often entirely fictitious ones. It is using the small saver’s capital to play the stock exchange, where that capital is exposed to risk daily.

Those debts are illegitimate: loans had been contracted to the benefit of the Tsarist autocracy that “[had] never enjoyed the people’s confidence and [had] never received any authority from the people”, as well as that of foreign capitalists, Russian capitalists, and against the interests of the Russian people and of the nations dominated by the Tsarist Empire.

They are odious: the bankers, mostly French and English bankers, who issued Russian debt securities were well aware of the undemocratic nature of the regime and knew that the loans were not contracted in the interest of the people.5 Those bankers, among whom Crédit Lyonnais played a major part, received significant commissions and were the same who acted towards an immediate return of profits resulting from the investments of European capitalists in Russia. Moreover, they helped the Tsar to bribe Western journalists and politicians so that they would lie through their teeth about the situation in the Russian Empire and thus encourage members of the middle class in their respective countries to buy Russian debt securities.6

Those debts are unsustainable: the living conditions of people in Russia were as described above and could not be improved as long as the country was financially asphyxiated by its public debt.

As a consequence, the St-Petersburg soviet called for the overthrow of autocracy and the establishment of a constituent body that would represent and stand for popular expectations; such a body would “carry out a close investigation of the state finances and will draw up a detailed, clear, accurate, and certified balance sheet of state revenue and expenditure (budget).” Finally, the soviet decided “not to allow the repayment of loans which the government contracted while it was clearly and openly waging war against the entire people.”

Between 1905 and 1917, the situation got worse. In 1914, the German, British and French imperialisms engaged in an incredible slaughter to expand their respective share of the world. Among the declining empires, Austria-Hungary and the Ottoman Empire sided with the German Empire while Russia sided with France and the British Empire, hoping among other expectations to gain direct access to the Mediterranean in Constantinople, the capital city of the Ottoman Empire.7 Among Russian socialists in exile, the future leaders of Soviet Russia opposed the war as soon as it started and called upon solidarity between all European peoples in their common struggle against their respective bourgeoisies.

With its millions of casualties and massive destructions, war accelerated the revolutionary thrust in Europe. It had also made banks and weapon traders much richer. Between 1913 and the October 1917 revolution, Russian public debt was multiplied by 3.6 and rose from £930 million to £3,385 million.

In November 1917, the Bolsheviks and the Left Socialist Revolutionaries formed a government that was supported by the soviets, those councils that de facto embodied popular sovereignty after the Tsar had been overthrown. The new government acknowledged de jure the soviets’ sovereignty. The decree that repudiated the debts contracted by the Tsarist regime and by the provisional government was signed on 3 February 1918 and published in the official journal on 10 February 1918.

Leon Trotsky was to write in his autobiography: “its own obligations the Revolution recognizes to the full. The obligation that it took upon itself on December 2, 1905, it carried out on February 10, 1917. The Revolution is fully entitled to remind the creditors of Czarism: ‘Gentlemen, you were warned in ample time.’8

| French daily newspaper LHumanité on November 1917 | MR Online

French daily newspaper L’Humanité on November, 1917.

A violent reaction by creditors

The leaders of the new Soviet Russia could not imagine that the revolution could be achieved without its spreading beyond the Russian borders. Russia’s economy was weak and the country badly needed allies. The Soviet leaders called for a global revolution while revolutionary surges occurred in several European countries where more and more soldiers and civilians stood up against the war. Capitalist powers saw opposition to Soviet Russia a way of preventing revolutionary aspirations from spreading in their own countries.

On the other hand, the economic interests of foreign powers were jeopardized by the Russian revolution. At the start of the First World War, “investors” in France held 80% of Russia’s external debt and most of the existing Russian loans had been issued on the Paris market. Russia’s other creditors were mainly British, Belgian and German. Productive investments in Russia came more from European capitalists than from the Russian capitalist class, which was hardly extent. Now, the nationalization of industry was soon added to the repudiation of debts.

European capitalist powers, the United States, Canada and Japan thus joined an imperialist aggression against Soviet Russia. According to Winston Churchill, Minister of War in the British government, there were a total of up to 180,000 allied foreign troops. Foreign intervention actively supported the counter-revolutionary armies in Russia with a view to overthrowing the Soviet government and restoring capitalism in the country. Not surprisingly, the French government, true to the interests of capitalists in is country, was the most relentless among foreign governments that participated in a military intervention in Russia.

Soviet Russia eventually won the civil war and foreign troops had to retire in 1920 and 1921 (only Japan kept troops in Russia until 1922). It acknowledged the independence of the three Baltic States and of Poland in the name of peoples’ right to self-determination and stated again that debts contracted by the Tsar in the name of those occupied territories must not be repaid. The latter provision raised loud protest among allied powers, in full contradiction with the 1919 Versailles Treaty, which stated that territories that had been German colonies before Germany’s defeat were not to repay debts contracted by the colonizing power.

In the spring of 1922, an international conference was hosted in Genoa by five capitalist powers, first among which were Britain and France (the United States, that had become the first economic power in the world thanks to war, did not take part in this meeting). Invited along with most independent nations, young Soviet Russia accepted to attend the meeting (its representatives criticized the fact that colonized countries and workers’ organizations had not been invited). Officially, the aim of the Genoa conference was to organize the reconstruction of Europe. In fact, Russia, exhausted by the civil war and still subject to an economic blockade that had not yet been fully lifted, was ready to take out loans and attract foreign investment to revive its economy. The European leaders, aware of this situation, intended to use it to force the Soviet government both to acknowledge the debts it had repudiated in 1918 and to cease calling for a global revolution. Ultimately, the idea was to use diplomacy and blackmail where arms had failed.

Indeed, five days into the meeting, a document stating the demands of the capitalist governments towards Russia was presented. It explicitly demanded that the Soviet government acknowledge

the financial obligations of its predecessors, viz. the Imperial Russian Government and the Russian Provisional Government, towards foreign Powers and their nationals.9

This file also demanded the establishment of a “Russian Debt Commission” aiming at setting up a foreign financial monitoring on Russia and compelling it to repay debts it had repudiated.

| The Conference of Genova in 1922 | MR Online

The Conference of Genova in 1922.

Capitalist leaders soon had to sing to another tune. Russian diplomats claimed again that Soviet Russia was fully within its rights to repudiate all Tsarist debt (as well as debt contracted by the provisional government until the October revolution). They affirmed that the European demands were a legacy of Russia’s odious past, and that, since a revolution creates a new legal order, governments and administrations that stem from it “are not bound to respect the obligations of the Governments which have been overthrown”.10

In this respect, Soviet diplomats brought in the historical precedents of France and the US:

The French Convention, from which modern France claims direct descent, proclaimed, on September 22nd, 1792, that “the sovereignty of peoples is not bound by the treaties of tyrants.” In conformity with this declaration, revolutionary France not only destroyed the political treaties entered into with foreign countries under the old regime, but also repudiated her National Debt. She only consented to pay one-third of it, and that for motives of political expediency…. This procedure, exalted into a doctrine by eminent legal experts, has been almost universally followed by Governments created by revolutions or by wars of liberation. The United States repudiated the treaties of their predecessors, England and Spain.

However, the Soviet government agreed to resume payment of some of the Tsar’s debts (a. o. those contracted to build the Russian railways) after a thirty-year delay if the creditor governments should accept in exchange to officially recognize Soviet Russia, grant her bilateral loans and productive investments.

Here is the British government’s answer:

in Western Europe…, if you lend money to a man and he promises to repay you, you expect that he will repay you. [Another prejudice] is this: you go to a man who has already lent you money, and say, ‘Will you lend me more?’ He says to you, ‘Do you propose to repay me what I gave you?’ And you say, ‘No, it is a matter of principle with me not to repay.’ There is a most extraordinary prejudice in the Western mind against lending any more money in that way.

Soviet representatives, who had already emphasized that their government would not claim compensations for destructions during the civil war even though it could, pointed the capitalist powers’ responsibilities:

The British Premier tells me that, if my neighbour has lent me money, I must pay him back. Well, I agree, in that particular case, in a desire for conciliation; but I must add that if this neighbour has broken into my house, killed my children, destroyed my furniture and burnt my house, he must at least begin by restoring to me what he has destroyed

It is to be noted that during this last discussion the British government acknowledged the theoretical foundations of the doctrine of a revolutionary government’s repudiating debts contracted by a former regime, but refused to implement it, arguing that it would be bad diplomacy:

And if you are writing a letter asking for more credits, I can give one word of advice to anybody who does that. Let him not, in that letter, enter into an eloquent exposition of the doctrine of repudiation of debts. It does not help you to get credits. It may be sound, very sound, but it is not diplomatic.

It is possible to repudiate one’s debt unilaterally!

The conference ended without any agreement being found between Soviet Russia and its European creditors. A bilateral agreement had however been concluded with the Weimar Republic (that had replaced the German Empire after its defeat),11 with each party forfeiting war compensations. Besides, whereas it might have been anticipated that the firmness showed by the Soviet government and the failure of the Genoa conference would result in the capitalist powers adopting a more intransigent position toward Moscow, the opposite occurred.

Separately, the various capitalist countries all considered that they had to sign agreements with Moscow since the Russian market provided a significant outlet and the country had ample natural resources. In 1923–1924, despite the failure of the Genoa conference, the Soviet government was recognized de jure by the UK, Italy, the Scandinavian countries, France, Greece, China, and a few others. In 1925, Japan also recognized the Soviet government. In 1926, the USSR signed a credit agreement with German banks. In 1927, it was granted a credit by the Midland bank in London. In 1933, the United States recognized the USSR de jure, and in 1934, it agreed to trade with the Soviet Union. That same year, not wanting to be excluded from the Soviet market, France also offered loans to the USSR for it to buy French products.

The agreement between Russia and the UK signed on July 15, 1986 provided for a 1.6% compensation of the bonds’ updated value. In 1997, six years after the dissolution of the USSR, Boris Yeltsin signed an agreement with Paris to put an end to litigation over Russian bonds. The French creditors received compensations for a mere 1% of their claims. Such very low compensation rates again indicate that a country can indeed repudiate its debts without major consequences.

The later development of the Soviet regime–the gradual smothering of any criticism, the regime’s bureaucratic and authoritarian degeneration, disastrous farming policies (notably the forced collectivization under Stalin) as well as disastrous industrial policies, and Stalin’s enforcement of a terror regime in the 1930s–demonstrates that debt repudiation is not enough. To be of real use to society, repudiation must be part of a coherent set of political, economic, cultural, and social measures that can enable the country to evolve toward a society free of the different forms of oppression and exploitation.

A complete version of this study is to be found here.


  1. Éric Toussaint, “Lenin and Trotsky confronting the bureaucracy – Russian revolution and transitional societies”, Europe solidaire sans frontières.
  2. The decree was adopted on 3 February 1918 and published in the official journal one week later. These dates are expressed according to the current Gregorian calendar. At the time and for a few more days, Russia was still using the old Julian calendar. According to this former calendar, the decree of repudiation was adopted on 21 January and published in the official journal on 28 January.
  3. The soviets (Russian word for ‘councils’) first appeared during the revolutionary movement of 1905 and spread to all areas and activities in 1917. They are bodies through which the revolutionary movement self-organized. The soviet in St-Petersburg, the capital city of Russia until March 1918, played a decisive part in leading the 1905 and 1917 revolutions.
  4. The text of the manifesto was reproduced by Leon Trotsky, president of the St-Petersburg soviet, in 1905, chapter 20. The passages from the manifesto that are quoted in this article refer to this version. The work is available online.
  5. According to the odious debt doctrine, a debt is said to be odious and can be cancelled if it was contracted against the interest of the population and if creditors are or could be aware of this. The fact that creditors knew they were helping a despotic regime is an aggravating factor but is not a sine qua non condition to determine the odious nature of a debt. See Éric Toussaint, “Demystifying Alexander Nahum Sack and the doctrine of odious debt”, cadtm.org.
  6. Nathan Legrand, Éric Toussaint, “The French press in the pay of the Tsar”, cadtm.org.
  7. London and Paris had promised the Tsar that he would get Constantinople from the Ottoman Empire. France would retrieve Alsace and Lorraine from the German Empire as well as part of the Middle East (Lebanon and Syria) from the Ottoman Empire. The United Kingdom would comfort its colonies in the Middle East (Palestine, Jordan, Iraq, the Arabic peninsula) and in Persia. Finally, France and the United Kingdom planned to share the German colonies in Africa: Togo and half of Cameroon for France; Tanzania, the other half of Cameroon and Namibia for the UK. Belgium, that already owned the Congo, would get Rwanda and Burundi from the German Empire. This was all arranged without taking the least account of the right of peoples to self-determination.
  8. Leon Trotsky, My Life, 1930, chapter 14. The work is available online.
  9. Papers Relating to International Economic Conference, Genoa, April-May, 1922 (London: H. M. Stationery Office, 1922)
  10. Quotations from the debates at the Genoa Conference are from John Saxon Mills, The Genoa Conference (London: Hutchinson & Co., 1922)
  11. In Germany as in other countries involved in the war, opposition to war had grown steadily as the war lasted. In January 1918, while the German empire was attempting to impose its diktat on Soviet Russia during the Brest-Litovsk peace negotiations, a general strike of German workers demanded peace without annexation. The strike movement was eventually defeated. End of October of the same year, German sailors mutineered in Kiel, a harbour city on the Baltic. Soldiers’ and workers’ councils were formed on the same pattern as the soviets in Russia, and seized power in several German cities (Kiel, Hamburg, Hanover, Frankfort, Munich, etc.). On 9 November, a mass demonstration took place in Berlin. Emperor Wilhelm II abdicated and social-democrat Friedrich Ebert became the first head of government of the Weimar Republic, which functioned as a parliamentary democracy. But power was also claimed by the soldiers’ and workers’ councils that wanted to set up a republic of councils on a soviet pattern. In January 1919, on order of Friedrich Ebert’s government, revolution was suppressed in blood by Freikorps, far-right militia that opened the way to Nazism in Germany. Rosa Luxemburg and Karl Liebknecht, who were at the head of the Communist Party, were murdered on 15 January 1919. Afterwards, with Friedrich Ebert as president, the Weimar Republic was run by an alliance between social-democrats, liberals and Christian conservatives, that was still in power at the time of the Genoa conference.