1/11/99 - Report: Bonn Angered About Russian Debt-Rescheduling Plans
<Picture>
Frankfurt-Jan. 11-FWN--Germany is not happy with mounting pressure it faces to annul old debts owed by the Russian government but inherited from the Soviet period, according to a report today in the German newspaper Handelsblatt.
Russia"s western creditors--governments, multinational financial institutions and banks--are currently engaged in negotiations on who will get the currency reserves left for debt servicing in 1999 after last year"s rouble debacle.
To service its debt commitments this year, Russia will need $17 billion. At best, it will be able to pay a total of $9 billion, the newspaper reported. The Russian central bank on Sunday confirmed its gold and currency reserves have fallen 20% during the past year to just $12.2 billion.
To the annoyance of Bonn, Washington is pushing for amnesty on all debt inherited by the government of the Russian Federation from the USSR. The debt had been rescheduled at the start of the 1990s under an agreement between the then-Soviet government and the so-called Paris Club of western creditor states.
Initial moves on debt amnesty have been taken by U.S. Deputy Secretary of State for foreign affairs Strobe Talbot and Lawrence Summers, Deputy Secretary of State for finance, according to leaked reports from Russian sources on Sunday.
According to the sources, Washington is pushing for the Russian government to give priority to servicing debt Russia contracted on its own account with the International Monetary Fund (IMF), World Bank and foreign governments. Debt servicing inherited from the USSR should take second place, the United States is reportedly arguing.
The United States has practically no old debt owed to it from the Soviet period. If debts contracted by the USSR are taken into account, however, Germany emerges by far as Russia"s largest single creditor. At DM25 billion, credits issued by Germany accounted for half the old USSR debt. Since the USSR was dissolved at the end of 1991, Germany"s exposure has risen by a further DM30 billion.
In 1999, the Russian government is due to pay a total $6.4 billion against debts inherited from the USSR. Of this, $4.5 billion is due to go to the Paris Club and $1.9 billion to the London Club of western banks. Lack of funds has already led it to default on a $362 million interest payment to the London Club on USSR-contracted debt. The payment was due at the end of 1998.
German banks stress the need to comprehensively restructure Russia"s private-sector debts. On top of the $17 billion needed in 1999 to service debts contracted with foreign governments, some $16 billion will be needed to service foreign debt incurred by Russian banks and private- sector businesses, the Handelsblatt reported.
With a total $145 billion owed to foreign states, Russia"s average annual debt-servicing level during the next 10 years will come in at $15 billion. One-third of foreign debt servicing payments by the Russian government during the next three years will be made to international organizations such as the IMF, the report said. |
