"Loans for Shares" Revisited

Abstract

The "loans for shares" scheme of 1995-1996—in which a handful of well-connected businessmen bought stakes in major Russian companies—is widely considered a scandalous affair that had disastrous consequences for the Russian economy. Fifteen years later, the details of the program are reexamined in light of evidence available today. The conventional wisdom about "loans for shares" is analyzed in terms of how much of the market the stakes involved represented; the pricing in terms of international practice; the scheme's place in Russia's increasing wealth inequality; who the biggest beneficiaries were: and the firms' role in Russia's rapid growth after 1999.