THE HISTORY OF SOVIET SAVINGS AND HOW RUSSIA “DECEIVED” UKRAINE: A DETAILED OVERVIEW

Feb 17, 2025 - 15:36

THE HISTORY OF SOVIET SAVINGS AND HOW RUSSIA “DECEIVED” UKRAINE: A DETAILED OVERVIEW

Introduction
Background: The Economic and Political Situation at the End of the USSR
1. Demonetization and the Crisis of the Soviet Financial System
2. Why Citizens Kept Their Money in Savings Books in the USSR
The Collapse of the USSR and the Issue of “Soviet Deposits”
1. How the Collapse of the USSR Affected the Banking System
2. Legal Aspects: Who Was Responsible for the Devalued Savings
The 1994 “Zero Option”
1. The Essence of the Agreements
2. Why the Idea of “Swapping” External Debts for External Assets Emerged
3. Consequences for Ukraine
How the Myth of “Deception” Emerged
1. The Logic Behind the Accusations: “Russia Took the Assets and Left the Debts to Others”
2. The Real Financial Picture: External Debt vs. Internal Obligations
Hyperinflation and the Actual “Devaluation” of Deposits
1. The Economic Crisis of the 1990s and the Radical Decline in Purchasing Power
2. Government Attempts to Compensate for the Devalued Savings (Ukraine, Russia, Other Countries)
The Issue of “Reparations” and Why the Term Is Not Entirely Appropriate Here
1. The Definition of “Reparations” in International Law
2. Why the Topic of Reparations Is Sometimes Confused with the Payment of Old Deposits
Lawsuits and International Attempts to Revisit “Soviet Debts”
1. Were There Any Successful Cases?
2. Russia’s Legal Position and the Response of International Judicial Authorities
The Modern Context (Relations Between Ukraine and Russia)
1. A Brief Overview of Events After 2014
2. The Full-Scale Invasion of 2022: The Issue of Reparations and Compensation in an Entirely Different Light
Conclusions
1. “Deception” or the Outcome of the Collapse of a Unified System?
2. Historical Lessons and the Relevance of This Topic Today

1. Introduction

The problem of so-called “Soviet deposits” remains a painful issue for millions of citizens of the former USSR, including Ukraine. After the Soviet Union collapsed in the early 1990s, people with large nominal sums in their savings books discovered that their money was rapidly devalued by hyperinflation, and there was practically no organizational or legal mechanism for returning those funds or providing compensation. One aspect of this problem is the claim that “Russia deceived Ukraine,” receiving all the international assets of the former Union without providing appropriate compensation to Ukrainian depositors. Colloquially, it is often phrased as: “Russia took ‘everything’ for itself, while debts to ordinary people remained with others.”

In this article, we will explore the historical and legal background that formed the “myth” of deception. We will also analyze how the debts and assets of the USSR were distributed in the 1990s, what the “Zero Option” was, and why it became a key legal mechanism. Finally, we will see why the term “reparations” from the perspective of international law does not entirely match the realities of Soviet savings.

2. Background: The Economic and Political Situation at the End of the USSR

2.1. Demonetization and the Crisis of the Soviet Financial System

In the 1980s, the economy of the USSR was in a state of profound systemic crisis. The planned model, which once provided a certain stability, no longer met the challenges of the global market or internal needs. Shortages of goods, supply problems, and low productivity contributed to the population’s loss of confidence in the Soviet currency.

When perestroika began in the second half of the 1980s, it led to a partial liberalization of the market. However, the rapid growth of shortages, the lack of a proper market regulation mechanism, and the further rise in inflationary processes were early signs of an economic collapse.

2.2. Why Citizens Kept Their Money in Savings Books in the USSR

During Soviet times, there was a state monopoly on banking. Citizens were practically offered only one institution to keep their savings—“Oshchadkasa” (Savings Bank), later reformed into the Savings Bank of the USSR (Sberbank). This was virtually the only bank where an ordinary person could open a deposit.

For many people, these deposits were long-term financial buffers. Some families kept tens of thousands of Soviet rubles, planning on stability. However, by 1991 it was already evident that the ruble’s purchasing power was declining sharply.

3. The Collapse of the USSR and the Issue of “Soviet Deposits”

3.1. How the Collapse of the USSR Affected the Banking System

When the USSR ceased to exist in December 1991, each of the 15 republics gained state independence, introduced its own currency (gradually), and nationalized the property of the former Union located on its territory. If previously the Savings Bank (Sberbank) of the USSR was one centralized institution with branches throughout the Union, in the new reality, the branches in Ukraine were reorganized into a Ukrainian institution (initially called Oshchadbank of Ukraine).

This created a legal dilemma: now who was obliged to return the funds that were in the accounts of the “single” Soviet bank? Russia could say, “Yes, we are the successor to the USSR, but depositors in Ukraine now have a relationship with their own Ukrainian bank.” Ukraine, for its part, was not prepared to take on multibillion-dollar debts to the population, especially during an economic collapse.

3.2. Legal Aspects: Who Was Responsible for the Devalued Savings

At first glance, one might think that the “parent” successor state (the Russian Federation) should have assumed all or at least a significant portion of the obligations relating to internal debts of the USSR—such as repaying deposits. But that would have been a huge burden: the amount of Soviet deposits across the entire USSR was enormous, and in the 1990s, Russia itself was also in the midst of a deep financial crisis.

At the same time, the newly independent republics (Ukraine, Belarus, Kazakhstan, etc.) wanted to receive their share of the Soviet assets but had no desire to assume a proportional share of the Soviet debts. In the end, all these issues drove the parties to international negotiations and ultimately the signing of the “Zero Option” agreement.

4. The 1994 “Zero Option”

4.1. The Essence of the Agreements

In 1994, Russia entered into multilateral agreements with most of the former Soviet republics (including Ukraine), under which it recognized:

The Russian Federation takes on the entire external debt of the USSR to foreign creditors.
The Russian Federation acquires ownership of all external assets of the former Soviet Union, including properties abroad (embassy and consulate buildings, shares in international organizations, foreign exchange reserves, etc.).

Meanwhile, internal debts (for example, obligations for citizens’ bank deposits) became the responsibility of those states in which the depositors resided. The argument was that the Savings Bank branches on Ukrainian territory “passed” into Ukrainian state ownership, making Ukraine de facto the new owner of those financial institutions.

4.2. Why the Idea of “Swapping” External Debts for External Assets Emerged

At the time of the USSR’s collapse, its total external debt amounted to tens of billions of dollars (estimates vary, but we are talking about significant sums). The USSR also owned a considerable amount of property in various countries, such as diplomatic premises, trade missions, and financial assets. To effectively manage these and avoid endless disputes (where each republic might claim a share), it was simpler to reach a compromise.

Russia agreed to this “swap” for the following reasons:

To maintain its international authority and status as the sole successor state of the USSR (including its permanent seat on the UN Security Council).
To avoid uncertainty over managing buildings and assets abroad.
To retain control over the foreign property of the USSR as a strategic resource.

4.3. Consequences for Ukraine

By signing the “Zero Option,” Ukraine essentially agreed that:

The external debts of the USSR did not concern it.
Depositors who lived in Ukraine and had savings accounts could only seek compensation from the Ukrainian state.

Although Ukraine could theoretically have taken a share of the USSR’s external assets, it would have had to assume a proportional share of the external debt. However, in the 1990s, when Ukraine’s economy was in dire straits, such a financial burden would have been overwhelming.

5. How the Myth of “Deception” Emerged

5.1. The Logic Behind the Accusations: “Russia Took the Assets and Left the Debts to Others”

Popular interpretation often goes like this:

The USSR collapsed.
Russia declared itself the sole legal successor, acquiring a seat on the UN Security Council and global political influence.
“Zero Option”: Russia assumed the USSR’s external debts and “appropriated” foreign assets.
Yet it never compensated Ukrainian depositors for their Soviet savings.

From there arises the feeling that Russia somehow “outsmarted” everyone else, taking valuable property (foreign assets) and leaving millions of people (in desperate conditions at that time) without any real recourse.

5.2. The Real Financial Picture: External Debt vs. Internal Obligations

If we look at the numbers, the USSR’s external debt reached a massive sum in US dollars (70 to 100 billion, according to various estimates and methodologies). It took Russia years to pay it off (final payments were still being made in the 2000s).

At the same time, the total of Soviet deposits in the former USSR also amounted to billions (in Soviet rubles). But due to the hyperinflation of the 1990s, they were effectively devalued. Even if Russia, in theory, had decided to take responsibility for paying back these deposits to all post-Soviet citizens, it would have been almost impossible to do so during the economic collapse of the 1990s.

Thus, “deception” does not lie in any direct “theft” but in the complicated compromise that emerged from the urgent need to resolve issues of sovereignty, debts, and assets.

6. Hyperinflation and the Actual “Devaluation” of Deposits

6.1. The Economic Crisis of the 1990s and the Radical Decline in Purchasing Power

In the first years after the USSR’s collapse (1992–1994), Ukraine and other former republics experienced hyperinflation. Money lost its value almost weekly, and prices sometimes rose exponentially within months. People who had saved for years (for instance, to buy an apartment or for other major purchases) effectively lost their savings since the purchasing power of the karbovanets (the Soviet ruble, and later transitional currency notes in Ukraine) collapsed disastrously.

In Ukraine, the coupon-karbovanets (a temporary currency before the introduction of the hryvnia) also lost value. As a result, even if the government claimed, “We will return your savings,” in reality, the compensation was almost worthless.

6.2. Government Attempts to Compensate for the Devalued Savings (Ukraine, Russia, Other Countries)

Ukraine: Over the years, various resolutions were adopted to repay savings to Oshchadbank depositors, but these were merely partial measures and typically involved symbolic payments (e.g., a few hundred hryvnias). On the scale of comprehensive compensation, this solved nothing.
Russia: In the 1990s, it also tried to compensate for the lost deposits of Russian citizens, but these processes were drawn out over many years and were highly limited.
Other republics: In most cases, the situation was similar; governments did not have sufficient resources to meet “Soviet-era” obligations on savings accounts.

Effectively, the majority of the population across the post-Soviet space lost their savings. This provoked widespread resentment, but there was no mechanism in place to restore fairness.

7. The Issue of “Reparations” and Why the Term Is Not Entirely Appropriate Here

7.1. The Definition of “Reparations” in International Law

In international law, the term “reparations” is most commonly used to refer to payments a state-aggressor (or another state that lost a war) is obligated to make to the victorious state or a country that suffered damage due to war. A classic example is Germany’s reparations after World War II.

In the case of the USSR’s collapse and the loss of citizens’ deposits, there was no military defeat or post-war indemnity. Therefore, the term “reparations” is not legally accurate for describing the repayment of Soviet deposits.

7.2. Why the Topic of Reparations Is Sometimes Confused with the Payment of Old Deposits

However, in common language, the word “reparations” is sometimes used “by analogy,” implying that Russia, as the successor to the USSR, must “compensate for damages.” But from a legal standpoint:

The “damage” here refers to devalued money, not wartime destruction.
The “Zero Option” agreement forfeited the right of former republics to demand that Russia cover internal debts (including deposits).

Since 2014 (after the annexation of Crimea and the conflict in Donbas) and particularly following the full-scale invasion in 2022, talk of reparations between Ukraine and Russia has taken on a new dimension—now it pertains to war damages, not Soviet savings. But that is a different issue.

8. Lawsuits and International Attempts to Revisit “Soviet Debts”

8.1. Were There Any Successful Cases?

In the 1990s and 2000s, various lawsuits were filed in different countries (including Ukraine) against Russia, demanding the return of “Soviet” deposits. However, most of these cases were unsuccessful in domestic courts because the rulings often referenced international treaties (including the “Zero Option”) that delineated external and internal USSR debts.

8.2. Russia’s Legal Position and the Response of International Judicial Authorities

Russia has consistently maintained the stance that:

It was fulfilling external debt obligations inherited from the USSR.
Internal savings of citizens of other republics were not its responsibility.

Attempts to challenge this in European courts (such as the European Court of Human Rights) usually ended with conclusions that the matter was outside their jurisdiction or that the particular government (Ukraine or another republic) had to find a domestic solution for the compensation of depositors.

9. The Modern Context (Relations Between Ukraine and Russia)

9.1. A Brief Overview of Events After 2014

After the annexation of Crimea (2014) and the start of the armed conflict in eastern Ukraine (with Russia supporting pro-Russian separatists), economic and political relations between Ukraine and Russia deteriorated sharply. The question of “who owes whom and how much” took on an entirely different focus.

The topic of Soviet deposits effectively faded into the background in the face of more urgent issues: territorial integrity, sanctions, the fate of internally displaced persons, and so on.

9.2. The Full-Scale Invasion of 2022: The Issue of Reparations and Compensation in an Entirely Different Light

On February 24, 2022, Russia launched a full-scale invasion of Ukraine. Since then, discussions about possible reparations, indemnities, and compensation for damages have come to the forefront in legal and diplomatic spheres, but in the context of warfare. Again, we emphasize that this is fundamentally different from the issue of Soviet savings books, as now it involves wartime destruction, loss of life, and massive damage to the Ukrainian state.

10. Conclusions

10.1. “Deception” or the Outcome of the Collapse of a Unified System?

From a popular viewpoint, saying “Russia deceived Ukraine with Soviet deposits” resonates emotionally, since millions of Ukrainians never received real compensation for their savings. Meanwhile, Russia inherited the status of the USSR’s successor, retained a seat on the UN Security Council, and controlled foreign property.

Yet from a legal and economic perspective, the matter is far more complex. The main mechanism was the “Zero Option”:

Russia shouldered the enormous external debt of the USSR.
Each newly independent state (including Ukraine) gained control of former republican assets and assumed responsibility for compensating its citizens’ internal Soviet deposits.

It should be noted that in Ukraine (as in most post-Soviet countries) in the 1990s, there were simply not enough resources to implement large-scale reimbursements. Moreover, hyperinflation quickly made all “Soviet-era” face values symbolic.

10.2. Historical Lessons and the Relevance of This Topic Today

The Vulnerability of a Single State Banking Monopoly. The situation with the Soviet Savings Bank (“Oshchadkasa”) demonstrated that when a system is monopolized and overly centralized, in the event of political collapse, millions of people can be left unprotected.
Lack of Adequate Compensation Mechanisms. Neither the USSR nor the young states that emerged from its collapse had an effective plan for settling internal debt issues during an economic meltdown.
Succession Is Not the Same as “Responsibility for Everything”. Russia, as the “successor to the USSR,” took on numerous international obligations, but under the “Zero Option,” internal Soviet deposits were handed over to the national governments of the republics.
Political Interpretation. In politics and public perception, there is still a strong conviction that Russia “took advantage” of the situation for its own benefit. This is partially true, but the issue of deposits was mainly sacrificed to resolve larger disputes over debt.

Today, the topic of Soviet savings is more a historical example, as over 30 years have passed since the collapse of the USSR. The issue of reparations to Ukraine for the damage caused by Russia, especially after the full-scale invasion in 2022, is much more pressing. Such reparations—if recognized on an international legal level—would create a very different precedent, unrelated directly to the history of Soviet savings books.

FINAL NOTE

In short:

Russia did indeed “inherit” significant international assets from the USSR, but it also assumed the colossal external debt.
Ukraine, having become independent, along with other post-Soviet states, declined its share of the USSR’s external assets to avoid having to cover its share of the Union’s external debt.
Internal debts (including Soviet savings) were to be compensated by national governments. For various economic, political, and financial reasons, these compensations were either minimal or not paid at all (when taking inflation into account).
The term “reparations” is not applicable here, as it typically refers to war-related compensation. Soviet deposits and their devaluation do not fall under that category.

Thus, the claim “Russia deceived Ukraine out of its savings” is an oversimplified reflection of a deep financial and political drama that followed the collapse of the USSR. On a broader level, it includes some truth about the injustice of lost savings, but does not take into account the complexities of international agreements and the colossal burden of external debt that Russia took upon itself.

This topic remains a historical example of how the collapse of a large state entity and the absence of clear mechanisms for guaranteeing savings can leave ordinary people in a vulnerable position—without real compensation and with the feeling that they were “deceived.”