Russia stands in danger of becoming the biggest international debt welsher of all time.
The losses of Western financial institutions and governments could be worse than those on the debts of Brazil, Argentina, or other nations a decade ago.
Last week, the International Monetary Fund negotiated a "framework" deal with Russia to restart a suspended $22.6 billion aid program of last July.
Details are to be worked out by an IMF team reaching Moscow this week. But reports from Moscow hint Russia might get $4.8 billion from the IMF, plus additional money from the World Bank.
If so, that would be about enough to service Russia's debts to the IMF and the World Bank for this year.
This would be an "accounting operation," notes William Cline, an economist with the Institute of International Finance, a Washington body that does research for the world's largest financial companies. The IMF would give Russia new debt for old debt.
Less attention was paid to a statement by Yuri Maslyukov, Russia's first deputy prime minister in charge of the economy.
Russia, Mr. Maslyukov is reported as saying, wants the holders of its Soviet-era debts to forgive 75 cents on the dollar.
Almost half of Russia's $148 billion in total external debts was piled up by the Soviet Union before its breakup in 1991.
Maslyukov was likely making an opening gambit for future debt rescheduling negotiations. The percentage forgiven may end up less than 75 percent.
"Two years ago," Mr. Cline notes, "if one asked if Russia needed massive debt forgiveness, the answer would have been no." With Russia's economy in bad shape, debt relief is on the table now.
By comparison, the large debtors of South America were forgiven about 35 cents on the dollar under the so-called "Brady plan" of 1989-92. Brazil, with nearly $100 billion in foreign debts, was the region's biggest debtor and benefactor.
Poland, in 1992, was forgiven 50 percent of its debt with Western governments, and 45 percent of its debts to private Western financial institutions. "Poland was being rewarded for its courageous efforts to transform its economy into a market economy," recalls Cline.
Poland also had political leverage. Millions of American voters have a Polish heritage. Many urged Washington to help.
Economists consider Poland's transition to free enterprise relatively successful.
Russia is different. Its economy is a mess. Mark Weisbrot, research director at the Preamble Center, a Washington think tank, accuses the IMF and the West of helping reduce the Russian economy to ruins by insisting on "shock therapy" - a rapid rather than gradual switch to capitalism.
"It's very easy to criticize when you have no responsibility," responds an IMF official. He points to the failure of Russia to carry out necessary reforms.
Whatever, Russians have lost about half their income in the past five years, says Mr. Weisbrot. He thinks Russia is only now recognizing that default isn't so awful. Thus it can bargain hard for major debt relief.
The Russians say they can't afford to pay the $17.5 billion due this year on its foreign debts. That amount is nearly the size of Russia's government revenues.
Already the government is offering 5 cents or less on the dollar for domestic treasury notes, some $10 billion owed foreigners.
Yet with last August's drastic ruble devaluation, Russia has a trade surplus of $3 billion to $4 billion a month, giving it the resources to service some debt. But worried Russians are taking $10 billion a year out of their country.
So the West's dilemma on whether to forgive Russia's debt may be more political than financial. Should it help Russia because it has nuclear weapons and perhaps influence in Serbia?
It's a question to be answered by politicians, not economists.