It's not 1998
With all respect to S&P's downgrading (which they amply deserve: after all, they ARE right about 50% of the time :)), I suspect the rumors of Russia's default have been slightly exaggerated.
First, let's get the facts straight. Russia's sovereign debt is only 4% of the GDP, and there is no reason Russian government should default on this, unless NATO's provocations in Georgia and elsewhere make them CHOOSE to stop servicing their debts just to make a point. In all other scenarios this debt load is easily manageable.
Second, many Russian companies ARE now in vulnerable position. What's important to understand is that a bankruptcy of one or several companies, even the ones where the government holds a controlling stake, is not a bankruptcy of Russia. The government is not legally responsible for this debt, and it may (or may not) bail out overleveraged companies at its discretion.
Third, Russian companies are illiquid, but they are not insolvent. There is no reason for them to go under, once the government helps them roll over their short-tern debt. The government doesn't need to assume the total 0.5 trillion debt of Russian companies. If it helps roll over the $150 billion due this and next year, companies should be able to service the rest using their internal resources. And the total expense of the government could actually be less, because there is really no need to rescue each and every company.
Fourth, let's not forget that despite all the excesses of putinism, Russia still has a capitalist economy, which has by now produced its own JPMs and BRK-As capable of re-capitalizing illiquid but solvent companies. Not everybody was overleveraged. Companies like Surgutneftegaz have plenty of cash, and could easily provide a part of the needed $150 bln.
Having said that, a $120-130 billion bailout is not the easiest choice to make, especially when commodity prices are tumbling. But putting things in perspective, its parameters would be comparable in all respects to the Paulson-Bernanke bailout, when you adjust for the relative size of the two economies. Considering that Russia has $500 billion of currency reserves and another $50 billion in its reserve fund, and has up till now run a healthy budget surplus (compare that with America's financial situation BEFORE the crisis), this bailout should be extremely expensive (no two ways to say that) but still affordable. In other words, unless the government mishandles its job too badly (and, at least as far as the financial part of the government goes, I don't see Kudrin and Ignat'ev as being any stupider than Paulson and Bernanke), Russia should emerge from the crisis badly bruised but still in one piece thanks to its accumulated reserves and to the early pre-payment of its sovereign debt. Actually, the crisis came in the right time. Things could really get out of control if the orgy of borrowing by state-owned enterprises had continued for another year.