Economic and financial security is among the most important sectoral policies of national security. Moreover, it is a significantly important element due to the fact that economical factor is decision-making one for ensuring national security1.

Detected as a systematic event (as within its spread it affects lots of system participants) it is a phenomenon whose consequences directly define the development of the national security system. Economic and financial security aims to ensure financial system stability as well as to develop early alert measures about existing or possible risk developments affecting monetary policy, financial stability and business turnover, and to exercise permanent control on it2.

Among the various cases of economic and financial security implementation on practice stands the economic factor "sovereign debt". The evolution of the global economic crisis combined with its predecessor, the US mortgage bonds crisis that began in 2008, as well as with its successor, the Eurozone sovereign debt crisis since 2009, denoted that debt is not only an economic or financial category3. Due to its interdisciplinary nature, it is being an element of the concept of experimental security science. Inasmuch as it directly affects the economic, monetary and financial security of a sovereign state, it acts as a factor ensuring its economic and financial sovereignty.

Nowadays, issuing debt for payout of current budget deficit (including military and defense costs) is neither a bad governmental behavior nor a short-sighted risk management model for generating a higher level of financial and economic security. On the contrary, prudent policy of budget deficit financing via sovereign debt issuance promotes economic growth and development and produces value added in economy and international geo-economics relations. Moreover, it affects directly military capabilities transformation and supports defense policy development taking into account defense costs made by virtue of lending facilities. Last but not least, prudent sovereign debt policy plays a role in dismantling macroeconomic asymmetries and imbalances between different sovereign countries, state entities and armies and military-political unions respectively. Besides, sovereign debt is used as a non-conventional instrument for risk modelling within the Third Wave of Security4 that leads to security economization.

Despite what is the above-mentioned, non-controlled rising of current credit exposures and assuming financial obligations beyond sovereign states' financial capabilities creates real risks for systematic shocks in financial security of the state. The importance of the sovereign debt's stability for the financial system's stability increases also due to the increased scale of the international financial markets and the diversification of investment instruments traded at it (especially derivatives, swaps, options and futures). Financial collapse is the most frequent systematical event of that type. It is being in various sectorial modifications: devaluation of national currency, fixed currency rate settlement mechanism, gold, precious metals and foreign currencies reserves minimization, seigneurage losses, lending facilities reduction, worst balance of trade (net exports) and worse balance of payments, liquidity crisis and insolvency. The lastly leads to declaring a moratorium on regular interest and maturity redemptions which means a total loss of financial sovereignty.

In case of a systematically important event as a financial collapse, for example, logically a collapse of the present economic model ensues. Replacing one regime with another generates risks and threats. Therefore, accumulation of (over)indebtedness should be defined as a significant systematic event (systematic shock) that threatens the smooth functioning of the public finance and national security system, including the defense and military sector. Taking into account the anthropocentric system as a factor, (over)indebtedness generates risks for the financial and economic security of the sovereign. At the same time, (over)indebtedness requires the adoption of new, wide and complementary identifying risks classification in experimental security science. For example it could be: energy risk (energy security), cyber risk (cyber security), military risks (military security), environmental risk (environmental security), transformation risk (transformational security) and information risk (information security)5. Hereof, sovereign debt risk, sovereign debt security respectively, is undoubtedly an important element of economic, financial and national security with a synergetic effect of highest intensity.


The above described is not a hypothetical situation with minimum probability of happening in practice. It is the way of how the global evolutionary process has fared since the 1990s indeed. We are acting as coevals and direct participants at the end of liberal capitalism era as well as of the end of capitalism era, in general. The last is based on three system postulates: i) single monetary issuing center, ii) private acquisition of bank interest profits, and iii) uncontrolled debt issuance for covering current budget deficits. The slogan of such an obviously exhausted civilization model could reasonably be formulated as "One debt writes off another." The lastly is a systematic crisis in security with irreversible consequences for economic and financial security.

Meanwhile, the total international indebtedness has been rising nowadays6. Generating debt security becomes an increasingly important determinant and factor of economic and financial security. Obviously, the last stage in the era of liberal capitalism will be marked by the debt stigma and its consequences for a long time. We are being participants in an active transformation process where international financial and economic relations framework is reshaping. Thus, debt is converting from politics to geopolitics, from economy to geoeconomy, from a means of autonomy and independence to a means of influence and control, pressure and domination. Specifically, all the implicit integrating properties of debt both as a concept of finance theory and security theory define the main characteristics of the sovereign debt paradigm being a synergy of all systematically important elements of national security.



In terms of polycentric model of global geo-economics development, sovereign debt should be determined as a passive asymmetric conflict of civil nature (non-military character). Due to its commercial and economic behavior, it represents an imbalance of geo-economic and geopolitical powers. What is more, sovereign debt is a strategic financial superiority (domination) and even a psychological ascendancy by a lender to a borrower due to the current economic weakness of the latter and his incapability to guarantee his own security with all the available resources by himself. Actually, it is a typical situation of geopolitical dependence by reason of financial dependence (a subordination and obedience, in some cases) in practice. Economic uncertainty directly affects the economic (in) stability and fluctuations, transforming them into debt instability and financial dependence, respectively. In some cases the latter could reach the dimensions of a sovereign debt war (see Fig. 1).

Figure 1 Sovereign Debt Dependence Algorithm as an Asymmetric Conflict of Civil Nature

Figure 1 Sovereign Debt Dependence Algorithm as an Asymmetric Conflict of Civil Nature

On the one hand, sovereign debt is a conversion operation of the lender by his function as "a creditor and a security provider" to his other function of "a controller and an agent of security", done by multiplying his relative sovereignty and independence. On the other hand, sovereign debt acts as a form of transformation of the borrower from his role as "a user and a receiver of security" to his other role as "a debtor and a generator of insecurity" by reducing his relative sovereignty and independence. Via those functional roles and in terms of non-balanced security environment sovereign entities-actors (lender and borrower) interact together a priori. From the moment of financial agreement assignment, they become interdependent. Meeting the needs for fresh financial resources of the sovereign borrower by financial power of the sovereign lender defines the cross point of their strategic interests, targets, and desired level of security. The parameters of this bilateral sovereign debt security are dynamic points whose location at the coordinate system of economic sovereignty shows some typical characteristics of the sovereign state, namely:

  • Level of development of the national economic and financial potential for ensuring national military and defense capabilities;
  • Accumulation of fiscal buffers as well as capabilities for effective counteractions against potential economic discriminations, sanctions, embargo, blackmails and diktat;
  • Ability to prevent erosion of economic and financial values of a nation;
  • Upgrade of national military and defense capabilities for generating security via financial lending facilities;

Paul Wilkinson defines similar situation refracted by the prism of fight against terrorism as ".. .a realization of the strengths of the weak versus the weakness of the strong ..." comparing antiterrorist actions with those of a goalkeeper in a football game. "...He could be brilliantly guarding his football team gate hundreds of times. Nevertheless, people will remember the only one goal he misses."7

A good example of a far-sighted deal of "borrowed security" and long-term strategic financial decision for security and defense is a case from the Czech Republic. In May 2014, the Government in Prague signed a new bilateral agreement with the Government of the Kingdom of Sweden and SAAB whereby the period for buying 14 aircraft SAAB JAS-39 Grippen C/Ds was been extended by a further 12-year lease payment (at least until 2027) and service (training and upgrading) by SAAB till 2026. The agreement replaced the original 10-year bilateral agreement from 2004 worth 780 billion Euro for buying 12 single-seat Grippen Cs and 2 D-model trainers, modified to match NATO standards8.


As a result of the functioning of global Orthodox economic systems and various levels of economic freedom in it, sovereign debt is directly dependent on the chosen (or staged in some states) economic model of the civilization development as well as on the desired level of security. For some sovereigns that are leading actors in the world (e.g. free and developed states as the USA, Russia, China, India, the Asian Dragons, and the countries of Scandinavia) issuing a new debt is an extremely well economically and politically justified major investment operation in their long term defense and security. What is more, security and defense are not just a major pure and paramount public good for them9.

The sovereign debt is a synergetic product combining financial investment with investment in security and defense in one, thus guaranteeing smooth functioning of the national security system even in a moment of crisis. For states like the abovementioned, lending and borrowing a debt is a matter of a long-term marketing strategy for security by virtue of which they achieve its military, technological, geopolitical, economical and geostrategic superiority in a dynamic international security environment. These states purposely maintain breached parity of forces between subjects and weakened national security and defense systems in order to use the weaknesses of the weak against them, and the strengths of the strong against all others. However, in both cases the positive effects and favorable consequences are generating benefits only for the strong.

Ergo, the used civilized model of development allows full utilization of economic potential of sovereign debt to ensure and strengthen national security system via its synergetic effects:

  • Early identification of the economic weaknesses and vulnerabilities of a weaker sovereign state;
  • Drawing up a roadmap in order to overcome conjuncture economic and financial uncertainty and to increase the security level;
  • Intensification of cooperation with international financial and credit institutions10 for performing structural reforms instead of accumulating new debts, i.e. gaining security in lieu of gaining debts;
  • Quantitative checking for quality of financial liabilities in order to identify "toxic assets" and quickly release them or to execute remedial procedures if relevant;
  • Implementation of effective policy for upgrading the civilized model of economic development and security;

Nowadays, the epistemological model of market fundamentalism transforms the geo-economic aspects of sovereign debt into a syntagma of geo-economic, geopolitical and geostrategic military order and defense supremacy. Therefore, it would not be exaggerated to say that as a result of the functioning of Orthodox economic systems, and especially the collapse of liberal capitalism, security became welfare - goods - product - a basic driving power in global geo-environment at the beginning of the 21st century.


Given the unreasonable increase of geopolitical and geostrategic ambitions by some states11, one can consider that sovereign debt appears as a form of latent, implicitly acting financial slavery and a means of colonial exploitation at the beginning of the 21st century. In this situation, the sovereign state-borrower becomes a vassal of its lender, the financial feudal.

In addition, in such a form of geo-strategic and geo-economic dependency it is not even necessary for the liquidity provided by the lender to be made available to the borrower as a money loan (by cash or by bank transfer) only. In practice, due to the evolution of financial markets and the continuous development of payment and settlement systems, it is often the case that sovereign debt dependency is realized by active investment operations on open international capital markets, in a dematerialized, book-entry form.

Ante factum, these transactions seem to be standard, harmless, legal and popular, e. g.:

  • Sovereign debt issuance via government and/or government guaranteed securities (T-notes, T-bills, T-bonds);
  • Swapping and converting (exchanging) of one type of government securities to/with another one;
  • Active/passive novation of sovereign liabilities;
  • De-recognition (remission) of an obligation on behalf of another etc.

Typical case for debt swapping (rollover) is both weapon and off-set deals (Fig. 2). For example, sovereign entity "X" sells to the sovereign entity "Y" weapons and ammunition at agreed price. At the time of the execution of settlement, the sovereign entity "X", due to its temporary insolvency, an embargo or other reason, incl. bankruptcy, is incapable to meet all of its financial obligations related to the weapons deal.

Figure 2 Typology of bilateral interaction and interoperability between counterparties in a weapons deal

Figure 2 Typology of bilateral interaction and interoperability between counterparties in a weapons deal

Therefore, based on written bilateral notifications, the obligation is further reshaped and recycled with another parameters. Thus, sovereign "Y" owes the value of the deal to the sovereign "X" not as a current liability in a typical commercial deal or as a commodity credit, but as an international (interstate) one instead of intercompany debt, qualified and recognized by both states as sovereign debt12. Post factum, however, these active/passive investment operations cannot always be qualified as harmless and minor. In some cases one does find well prepared operations of latent radical terrorism financial activities, money laundering transactions and securities bought with "dirty money"13, tax and revenue avoidance scheme operations, money transfers via the Hawala remittance system, money transfers to special zones classified as "tax havens", conversions or transfer property deals acquired due to criminal activity and other social dangerous acts (actions or omissions) culpable and legally declared punishable.

In addition to the above-mentioned operations and because of their business scale, the national courts and jurisdictions in combination with present global securities holding, trading and lending models14, bondholders often remain unknown to issuer.

As a result of those legal circumstances, in most cases (except upon an interest expressed by the issuer following special order and subject to certain cumulative facts), bondholders remain unknown until the maturity date of the security. There is no transparency due to lack of communication and information network between the issuer of securities and its bondholders. Interaction between them is placed by their investment intermediaries15. The latter (custodians and safekeepers) are the only legal entities that have information for the "very last counterparty" at the value chain of deal (see Fig. 3).

On the other hand, some purposeful actions of the developed countries should also be kept in mind. States use the holding model of sovereign securities described above for the execution of their strategic geopolitical, geo-economics and military-defensive targets. For example, the majority of last sovereign bonds issued by the Republic of Ukraine on the international capital markets16 between 2013 and 2014 was quickly bought on primary market and traded later silently by economic and legal entities (both private and corporate), residents of the Russian Federation. In addition, Ukrainian bonds were also mostly bought via Russian capital of nonresidents on the territory of Ukraine (the case of so called "Oligarchs controlled by President Putin"). Later on, the mass buying of Ukrainian sovereign debt securities "manipulated" by Russian money continued albeit indirectly with lower intensity. Moreover, due to the investment operations described above (a quiet asymmetric warfare, a hybrid war) Putins Russia put its hands on the financial agenda of both Yanukovych and Dondars Ukraine and predetermined the theater and shift of political and military centers in the Crimean Peninsula in 2014 for its annexation

Figure 3 Sovereign Debt Securities Holding Mechanism issued by Sovereign State

Figure 3 Sovereign Debt Securities Holding Mechanism issued by Sovereign State "X"

In May 2015 Ukraine is almost bankrupt. The economy is in a "free-fall" situation. There has been a Parliament's "Debt Moratorium Authorization" since May, 19th pursuant to the Moratorium law adopted newly17. According to it, the Cabinet of Ministers of Ukraine has been granted the right, if necessary, to terminate payments to the holders of its international debt obligations (external public debt worth $21 billion). What is more? The Moratorium excludes a suspension of payments of state and state guaranteed loans received by the International Monetary Fund and other international commercial creditors. But it does renege Ukrainian debt obligations with Russia solely ($3 billion), as specified in the Annex to the relevant Regulation of the Cabinet of Ministers, excluding its gas debt obligations.

In contrast, Moscow expects Kiev to make its next debt payment in June 2015 - $75 million is due. Otherwise, the Kremlin intends to sue Ukraine in the court in relation to the two-year bonds issued in December 2013 and governed under English law. Thus, the terms could be pressed in an English court - and those terms are unusually restrictive for a sovereign bond contract. According to Bank of America Merrill Lynch, '(t)here is still some way for the bonds to fall if the government takes a tough stance" .

Undeniably, "Sovereign Debt War" like "Gas War" (typical one for Russian and Ukrainian geopolitical relationships) goes ahead of "Territorial War" and real combats for the Crimean Peninsulas annexation. Thus, Ukrainian Sovereign Debt becomes a means for colonial exploitation, regional and sub-regional influence by a central-placed, dominating sovereign entity to a peripheral and a semi-peripheral dominated sovereign entity19. Obviously, Sovereign debt is going to be among the expensive exchange coins that will be traded in the war and military actions in the region for decades.


Nowadays, the collapse of the global monocentric political model together with relocation of one state by another acting as a leader on the world political scene (center, periphery and semi-periphery), presumes an innovation of the civilized model of economic development. Moreover, it enforces a change in the mental and cognitive security concept. The decline of the previous geopolitical doctrine of mono- and bipolar geopolitical dominance and superiority is going to be converted or replaced completely by a new polycentric doctrine. This time, however, it will not be done by a homogeneous geopolitical one as in 20th century but via a non-homogeneous geo-economical one. In the abstract, the experimental security science assumes that the security is going to be reshaped into a new, non-homogeneous geo-economic paradigm.

This global development model, a mental paradigm of new security level, is being preceded by all level significant transformations - starting from strategic geopolitical priorities domination towards strategic geo-economic priorities domination with lots of divergent non-homogeneous centers of action20. The leading determinants for strategic events in this non-balanced security environment are not going to be political and military-defensive priorities within a national or collective (union) format, but the geo-economic and financial capital interests aiming to conquer new untapped markets and unused areas of strategic energy sources. Thus, the ultimate goal of expansionary policy, well-known from history lessons, is the effective and efficient use of resources by some states at the expense of others. The latter includes placing the weak states under strong dependency of the powerful ones. Even at the cost of borrowed capital.

Last but not least, the new global polycentric model would enable sovereign states to fight for dominance and possession of resources via geo-economic dependency versus the power of sword and gun. The various elements of the new type of dependency include energy dependency, sovereign debt dependency, irredentism and territorial claims, ecological and environmental dependency, trade and economic wars (hybrid wars), international financial and capital markets speculations etc.

To summarize, the role, place, and importance of sovereign debt as a strategic factor of national security and defense should be explicitly noted in the context of the new global polycentric development model and security environment it reshapes. First, it might be considered as a new asymmetric conflict of civil nature which delineates a new paradigm of economic and financial security of sovereign states. Second, pursuant to its ontological nature, sovereign debt might be interpreted both as a function of selected or imposed civilization model of development and desired defense capabilities package referring security science to geo-economic, geopolitical and geostrategic military order at the beginning of the 21st century. Third, sovereign debt might be moderated as a form of latent implicitly functioning contemporary financial slavery and as a means for colonial exploitation, taking into account geo-economical expositions and relations generated by it.

The extensive and cumulative research of the three basic theoretical postulates in experimental security science described above in details builds up the framework of multifactorial geo-economic appearance of sovereign debt in the 21st century. It brings a vision of a new mental model of security in experimental science and in reality, namely the sovereign debt security paradigm.


Central Intelligence Agency (2013 to 2015), World Factbook.

Christie, Paul. Ukraine's fate no one cares. European Economic Bulletin. June 2014. Deriglazova, L. Asymmetric character of Contemporary Conflicts. Geopolitics Magazine. 2010.

Dobbs, R., Lund, S., Woetzel, J., Mutafchieva, M. Debt and (not much) deleveraging. McKinsey Global Institute. February 2015.

Feaster, Seth W., Schwartz, Nelson D. and Kuntz, Tom (2011), A Spectator's Guide to the Euro Crisis, New York Times, 22.10.2011.

Georgiev, J. Risk Management in National Security. Second amended and revised edition.

Sofia. 2015.

History of External Government Debt of Bulgaria (1878 - 1990). Bulgarian National Bank. Sofia. 2007. Part III.

Lendman, Stephen. Ukraine Debt Default. Kiev Reneges on Its Debt Obligations. Ukraine Parliaments "Debt Moratorium Authorization". Global Research, May 2015 National Security Concept of the Republic of Bulgaria. 1998. National Security Strategy of the Republic of Bulgaria. 2011.

Samuelson, Paul. Diagrammatic Exposition of a Theory of Public Expenditure. Review of Economics and Statistics 37 (4). 1955.

Samuelson, Paul. The Pure Theory of Public Expenditure. Review of Economics and Statistics 36 (4). 1954.

Slatinski, Nickolay. The Five Levels of Security. Sofia. 2010.

Stanev, Zhivko. Paradigm of Geo-economics - Global Moving Power in the XXI century. Geopolitics Magazine. 2006. Issue 3.

Statement of the Government of the Republic of Ukraine regarding a draft Law on granting to the Government of Ukraine a right to impose a moratorium on repayment of external debts Kiev, Ukraine, 19.05.2015.

Statement of the Ministry of Finance of the Republic of Ukraine regarding a draft Law on granting to the Government of Ukraine a right to impose a moratorium on repayment of external debts Kiev, Ukraine, 19.05.2015. World Bank (2013 to 2015), International Debt Statistics.

1The National Security Concept of the Republic of Bulgaria. 1998. National Security Priorities and Factors. P. 5.
2 The National Security Strategy of the Republic of Bulgaria. Approved by the National Assembly Decision of 25.02.2011. Published in the State Gazette, issue 19 of 8th March 2011. Chapter IV. Security Policy, 3. Sector
Security Policies. Financial and Economic Security Policies. Point 72.
3 See Feaster, Seth W., Schwartz, Nelson D. and Kuntz, Tom (2011), A Spectator`s Guide to the Euro Crisis, New York Times, 22.10.2011.
4 The Third Wave of Security Concept” follows the interpretations by Prof. Dr. Nickolay Slatinski expressed in several of his publications. See Slatinski, Nickolay (2010), the Five Levels of Security, Sofia, p. 111 (The Third Level of Security: Security of State).
A detailed and comparatively accurate information regarding typology and classification of risks in national security can be found at Chapter I, 1.4. Typology of Risks at Georgiev, Yuliy (2015), Risk Management in
National Security, Second amended and revised edition, Sofia.
6 According to the last McKinsey report, global debt has risen by $57 trillion since 2007, rising to 286% of global economic output from 269%. Dobbs, R., Lund, S., Woetzel, J., Mutafchieva, M. Debt and (not much) deleveraging. McKinsey Global Institute. February 2015. Full report available at:
7 Deriglazova, L. Asymmetric character of contemporary conflicts. Geopolitics Magazine. 2010
9 The author shares the philosophical interpretation of defense and security as “pure public good” by Paul Samuelson via Samuelson, Paul A. The Pure Theory of Public Expenditure. Review of Economics and Statistics 36 (4). 1954; Samuelson, Paul A. Diagrammatic Exposition of a Theory of Public Expenditure. Review of
Economics and Statistics 37 (4). 1955
10 For example the International Monetary Fund, the World Bank, the European Central Bank, the European Investment Bank, the European Bank for Reconstruction and Development, the Black Sea Trade and Development Bank, the International Bank for Economic Co-operation, the Asian Development Bank and
11 Within the context of the duels Russia - USA and Russia - the European Union through the prism of the crisis in Ukraine since 2014 and, generally, the Russian-Ukrainian natural gas and oil conflicts in the last decade.
12 The People`s Republic of Bulgaria had several such deals in its capacity of licensed provider of weapons until 1989, an later, as creditor of other states. See at History of External Government Debt of Bulgaria (1878 – 1990). Bulgarian National Bank (2007), Part III.
13 Especially when the last is traded and placed on global markets.
14 Securities hereby recognized as an object of sovereign debt.
15 Dealer managers, settlement agents, payment agents, calculations agents, custodian agents, safekeeping agents etc.
16 Approximately 90% (own calculations by the author according to the Static database at the World Debt Tables, resp. International Debt Statistics of the World Bank, as well as to the World Factbook of the Central Intelligence Agency).
18 Lendman, Stephen. Ukraine Debt Default. Kiev Reneges on Its Debt Obligations. Ukraine Parliament`s “Debt Moratorium Authorization”. Global Research, May 2015.
19 Christie, Paul. Ukraine`s fate no one cares. Professional Public Conversation by the European Economic Bulletin. (Bremen, Lower Saxony, Germany). June 2014. Full text manuscript available at:
20 According to expressed views by Zhivko Stanev, Paradigm of Geo-economics – Global Moving Power in XXI century. Geopolitics Magazine. 2006. Issue 3.