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Wednesday, July 19, 2006

Relishing Russia's Return to World Stage

July 19, 2006 Petersburg, Russia – The Moscow TimesBy Catherine Belton - When President Vladimir Putin greeted the world's press crammed into a packed briefing room in the wee hours of Sunday, it seemed as if he could still barely believe his eyes at how far he - and his nation - had come.
"I would like to begin by thanking my colleagues, the leaders of the G8, for granting Russia the opportunity to organize this event in Russia and to act as president," he said, struggling to contain a pleased grin. "I am thankful, too, that they agreed to choose St. Petersburg this time as the setting for our work."
His appearance before the press that evening was the start of a weekend of talks that crowned Russia's return to the world stage as a major energy power 15 years after the Soviet Union's collapse.
An ebullient Putin led the summit, meeting with the press every day to drive home Russia's importance on the world stage. But with other G8 leaders at a loss to deal with Putin's swagger, observers say the summit could mark the apogee of the G8.
The world's leaders gathered for dinners in splendidly restored tsarist palaces in Putin's hometown and rushed to hold impromptu negotiations on how to end a flare-up of violence in the Middle East as Israel attacked Lebanon.
But as they tiptoed around concerns over Russian democracy in clear deference to their host, Putin took immediate advantage, sniping over U.S. President George W. Bush and attacking British Prime Minister Tony Blair.
When, during a briefing on Saturday, Bush bent over backward to accommodate Putin's insistence that Russian history made for different democratic traditions than in the West, Putin jumped in with a jibe at U.S. democracy-building in Iraq. "We certainly would not like to have the same kind of democracy as they have in Iraq, I'll tell you that quite honestly," Putin said. The briefing followed apparently frosty bilateral talks with Bush.
Asked late Saturday by a reporter whether he would discuss democracy with Blair, Putin answered with a biting remark.
"There are also other questions. Questions, for example, connected with corruption. It will be interesting for us to hear about your experience with Lord Levy," he said, referring to the British Labour Party fundraiser at the center of an investigation into whether seats in the House of Lords were handed out in return for cash.
Blair was said to be privately fuming.
Apart from a real thunderstorm that lashed Strelna over the weekend, nothing could rain on Putin's parade, it seemed.
Meeting with the press twice after midnight and once again at the close of talks Monday afternoon, Putin made sure to use each occasion to drive home the importance of Russia's role. Each time he appeared he was greeted with applause by the media.
During a briefing in the early hours of Monday, he made sure to point out how Russia's position had changed the G8's understanding of global security. "Until now, energy security has been understood as stable supplies to the main consumers of energy resources. We have convinced our partners that energy security is a much broader issue and includes extraction, transportation and sales on energy markets," he said.
Commenting on an emergency communique hammered out over the weekend by the G8 in response to the escalating violence in the Middle East, Putin again said Russia had managed to change the way the situation was viewed. "This is the most vivid example of how we influence the situation," he said. "I won't go into details ... but if it had not been for the position of Russia [the resolution] would have been different. It would not have been as balanced as it is now."
Putin was at pains to point out that Russia's contacts in the Middle East with organizations condemned by the West, such as Hamas, put it in a position to broker deals with all sides.
"This is the advantage of Russia," he said. "We have not closed the way for talks with all participants of this conflict. And it seems to me the level of trust we have is fairly high with all countries [in the region]."
As fighting erupted over the weekend between Israel and its opponents in Lebanon, the standoff diverted attention away from questions on how the rest of the G8 viewed Putin's track record on democracy. It also distracted much of the world media's attention from what appeared to be considerable differences of opinion on the agenda forwarded by Russia on energy security, infectious diseases and education.
And as the leader of the world's most powerful country, Bush was caught sounding tired and crude over the crisis in the Middle East when an open microphone accidentally transmitted his conversation with Blair over a final lunch and photo opportunity Monday.
Putin hinted it was time to replace the system of international relations dominated by the countries of the West. Without explicitly saying the G8 should be further expanded to include the new Asian economic powerhouses of India and China, he said no economic issues could be dealt with properly without these countries' participation. Indicating that such Western-built forums had had their day, Putin said: "After the collapse of the bipolar world, our world has not become safer. ... We do not have the tools and instruments to address the challenges of today.
"Here, we are developing the architecture for future international relations," he said.
As he closed the summit and left a briefing to meet with Chinese President Hu Jintao, he couldn't help lingering for one moment longer in his place in the sun.
He stopped, took a last look at the press, and murmured "Do svidanya."

Cooling likely in Russian-American relations - Russia expert

MOSCOW. July 18 (Interfax) - Russia and the United States failed to solve many problems at the Group of Eight summit in St. Petersburg, which could lead to a cooling in their relations, U.S. and Canada Studies Institute Director Sergei Rogov said. "But the Russian-American dialogue is continuing, which is a positive outcome of the summit," Rogov told Interfax on Tuesday. The Russian and U.S. delegations failed to reach an agreement on Russia's accession to the World Trade Organization, the political scientist said. Alongside objective requirements, the United States advanced "far- fetched demands, going far beyond the limits of the WTO standards." "No agreement was reached precisely due to these political, not economic reasons," he added. Rogov said that, "A large-scale anti-Russian campaign unfolded in the United States" ahead of the St. Petersburg summit. Another factor that could chill relations between the two countries is the low popularity in the U.S. of President George W. Bush, who "cannot even count on the Republican faction's support in Congress." Among the main disagreements between Moscow and Washington are the two countries' different approaches to CIS countries and the problem of Iran and North Korea's nuclear programs, said Rogov.

Thursday, July 13, 2006

U.S. Suffers Winner's Complex - Gorbachev

Mikhail Gorbachev / Photo from www.womensworldawards.com 13.07.2006 - ABC News - Mikhail Gorbachev is generally regarded as the man who broke down the "iron curtain" that separated the communist world from the West and thawed the Cold War between the United States and the Soviet Union. Now, 15 years after a coup removed him from power and the Soviet Union dissolved, he has some stern words for the United States, whose relationship with Russia has soured lately. "We have made some mistakes," he said, referring to recent attacks on Russia's democracy. "So what! Please don't put even more obstacles in our way. Do you really think you are smarter than we are?" The former general secretary of the Soviet Union Communist Party accused Americans of arrogance and trying to impose their way of life on other nations. "Americans have a severe disease —- worse than AIDS. It's called the winner's complex," he said. "You want an American-style democracy here. That will not work." Gorbachev found a partner in former President Bush in the late 1980s and early 1990s. During their time in power, communism fell in East Germany, when Germans tore down the legendary Berlin wall separating the democratic West from the communist East. The collapse of communism quickly spread across eastern Europe, and leaders worked together to create a partnership in their changing world. Gorbachev, however, is wry about the current president, George W. Bush. "He's very determined," Gorbachev said. "You can't say he does not have character." The former Soviet leader had severe criticism for two of the most important people in the Bush administration: Vice President Dick Cheney and Secretary of Defense Donald Rumsfeld. "They are just hawks protecting the interests of the military —- shallow people," he said. Gorbachev also often has stern words for the Russian government, but frequently advises President Vladimir Putin, who is under fire for his authoritarian tactics. "I told him I did not understand why he had canceled state elections. There is no glasnost," he said, referring to the Soviet push toward a more open society in the 1980s. "No elections here like there used to be in '89 and '90." "Vladimir Putin is walking on a razor's edge," he said. "Putin has used and he will continue to use authoritarian measures, but Russia will form a democracy. I know Vladimir Putin. He is a moral person." Gorbachev said he was ultimately a Putin supporter and was impressed by the president's need to create stability out of chaos. Although he has assumed the role of senior statesman and remains active in Russian politics, Gorbachev said he was "75 years." And, "enough is enough." He has not given up the dream of Russian democracy and hopes to see his two granddaughters live in freedom. "I want my grandchildren to live in a democratic country —- in a peaceful world," he said. "But it's hard to imagine because there are so many answers we still need to find."

Wednesday, July 12, 2006

World Bank - Russia needs more investment

07-12-2006 RBC News - Investment in the Russian economy currently stands at 18 percent of the GDP, Kristalina Georgieva, Director for the World Bank Russia program, said at an annual national business forum on Tuesday.
She said a lack of investment impeded Russia's economic growth and affected its macroeconomic stability. Georgieva put the required level of investment at 25 percent of the GDP. She defined corruption, low quality of workforce, restricted competition and problems with Russia's judicial system as the key problems faced by Russian business in 2002-2005. Georgieva also said that the part of the Stabilization Fund called the "Fund for Future Generation" should only be invested in the event of a budget deficit. It would be economically unfeasible to spend it under existing conditions, she said. Foreign direct investment in the Russian economy totaled $14 billion in the first half of 2006, Deputy Prime Minister Alexander Zhukov said on Tuesday. According to the State Statistics Service, foreign direct investment in the Russian economy in the first quarter stood at $3.845 billion, twice as much as in the same period of 2004. Total foreign investment in the first quarter amounted to $8.8 billion. Accumulated foreign investment in the Russian economy was $113.8 billion at the end of March 2006. The inflow of capital reached $18 billion in the second quarter of this year, Zhukov said. The capital inflow in the first half of the year was at a record high, he said, noting that Russia had had an outflow of capital for many years. The positive result made Russia more attractive to foreign investors, the Deputy Prime Minister stressed.

Tuesday, July 11, 2006

What Is Russian Civilization?

July 10, 2006 - Wall Street Journal - By Edvard Radzinsky -
Mr. Radzinsky is the author of "Alexander II: The Last Great Tsar" (Free Press, 2005).
Russia is an exceptional place. In the 20th century, over a single lifetime - 70 years - it saw three civilizations. Each of the first two was rejected by its successor, forcing people to renounce their convictions. You can imagine the chaos of ideas and beliefs in their hearts. The era of Muscovite czars and the following 300 years of Romanov reign was one of ruthless autocrats. The opportunity to destroy the autocracy appeared rarely, but it did appear. For example, in the early 1540s, the boyars (or nobility) ruled the country as regents of an infant czar. They could have established an aristocratic republic. Instead, they squabbled furiously, without forgetting the main occupation of Asiatic bureaucracy - stealing. The reign of Alexander II was another of those rare times when autocracy could have been transformed. This Russian Lincoln not only emancipated the serfs in 1861; he became the father of perestroika, reforming all parts of Russian life. But he was a typical Russian reformer, a Janus with one head facing forward, the other looking back. The reforms stopped in the first half of his reign. The czar was hated by liberals for stopping reforms, and by conservatives for starting them. Russia was still an autocracy, and the young - seduced by the reforms - felt deceived. An unprecedented terrorist organization was born in Russia, and in some measure, the czar was to blame. The "young people pure of heart," as a contemporary called them, gradually turned into cold killers, assassinating Alexander II in 1881. His son, Alexander III, returned Russia to the ruthless autocracy so dear to the hearts of its rulers. He dreamed of reverting to the times of his grandfather, Nicholas I (1796-1855), who had said, "Despotism exists in Russia because only it is in accordance with the spirit of the people." But toward the end of his reign, Alexander III asked his adjutant-general: "[T]here is still something wrong in Russia, isn't there?" The reply should be memorized by all of Russia's rulers: "Your majesty, imagine an enormous steam boiler filled with simmering gases. But there are people with hammers around it diligently riveting the smallest openings. One day the gases will break though a section that they will not be able to rivet back." The czar, according to accounts, "groaned, as if in pain." His son, Czar Nicholas II, became the victim of the explosion. That is how the first Atlantis, the autocracy of the Romanovs, perished. Astonishingly, it was members of the ruling class, the intellectual nobility who would not accept autocracy, who fomented the revolution. A poet wrote in the 19th century: "In Paris the cobbler revolts to become a landowner - that's understandable. In Russia, when the nobility makes a revolution, is it because they want to be cobblers?" In Russia, poets are often prophets. The son of a shoemaker, Joseph Stalin, became the first Bolshevik czar, and the No. 3 man in his government was a former shoemaker. The fantastical came to pass as a result of the Russian Revolution. In pious Russia, unknown radical Bolsheviks took power. The Bolshevik state created by Lenin became ridiculously similar to Nicholas I's ruthless monarchy. The barracks were completed by Stalin, child of the Russian Thermidor, an Asiatic Napoleon come to consummate the new Bolshevik civilization. Stalin had studied in a seminary, and said that Russia needed god and czar. He gave it a new religion: Asiatic Marxism. As befitted medieval religions, dissent was heresy, punished ruthlessly by death. The greatest temple was the Mausoleum, where, following the model of the imperishable saints, lay the body of imperishable Lenin. Stalin gave the country a new religion and he gave it czar and god in one person. Lavrenty Beria, chief of his security apparatus, explained the task of the film, "The Vow," to its director during production: "'The Vow' must be an exalted film, where Lenin is the biblical John the Baptist and Stalin is the Messiah Himself." Stalin's name was repeated all day on the radio. "Stalin this and Stalin that. You can't go to the kitchen or sit down on the toilet, or eat lunch without Stalin pursuing you: He got into your guts, your brain, he filled in all the holes, he ran nipping at your heels, called into your soul, got under the covers with you, and shadowed memory and sleep," wrote a woman in her diary. At the end of his life, Stalin signed a resolution to create a statue which could be compared only with the Colossus of Rhodes. Almost 50 meters tall, it was erected on the Volga-Don canal, built by convicts. One day, the keeper discovered that birds liked to rest on the head. You can imagine what the new god's face would look like. You couldn't punish birds, but the local authorities, smelling danger, found a solution: high-tension electricity passed through the giant head. Now the statue stood surrounded by a carpet of dead birds. Every morning the keeper buried the little bodies, and the earth, so fertilized, flowered. This was the symbol of the Bolshevik civilization built by Stalin, the second Atlantis, which drowned in 1991. Gorbachev began the path toward freedom, Moses moving eternally through the desert. It was a difficult journey. The republics spoke up. Stalin had built the USSR in an inviolable way, the republics held together by economic chains. Gigantic collapse was looming. The center did not want separatism, but the republics did. Young people in the republics, hot-headed, were ready to die for independence. Civil war stood on the doorstep of a country filled with nuclear warheads. A world catastrophe was very near. The peaceful dissolution of the USSR will be Yeltsin's greatest contribution to the history of the new Russia, which is only starting on its path. How difficult it is to build capitalism in a country where the unrighteousness of wealth is a beloved popular idea, a country without rule of law for a millennium, where the concept of "law" successfully substitutes for the concept of "justice," and where the bourgeoisie is brilliant at making money and totally useless at governing. The sad fact of Russian history is that the bourgeoisie has no experience of state leadership. How difficult it is to build democracy in a country where the dream of equality always trumped the dream of freedom. A major reason for Gorbachev's fall was that he did not understand this. He tried to become an ordinary politician, a political dancer - step to the left, skip to the right. But the public, after a millennium of autocracy, needed yet another czar, albeit in democratic garb. A czar does not dance, a czar commands. Yeltsin was like that. Yeltsin's tragedy was that he was an autocrat who sincerely tried to be a democrat. He forced himself to put up with what is most odious for a czar - freedom of speech, that is, public insults from Communists and other opposition parties. He knew how to shut them up, of course. He knew, but did not do it, for he was a democrat, and what would his best friends - Friend Clinton and Friend Kohl - say! This constant tension, of knowing what to do but not being able to do it, made him seek solace in the bottle and destroyed his colossal health. The end of his reign was marked by chaos and wild corruption. So once again, the people, as in the days of Ivan the Terrible, wanted a strict father. Yeltsin's majesty lay in doing the impossible for a Russian czar: voluntarily giving up power. Surprising the country, he turned the reins over to an unknown person. His fantastic sixth sense did not let him down. He selected a man the country wanted to see. After a president who made people wonder whether he would be able to get up from a chair, came a normal, modern and young man. He skied, and spoke breezily, without notes. He was probably the first Russian leader that teenage girls got crushes on. Vladimir Putin has ended the era of Kremlin ancients who elicited sarcasm in the West. He decisively executes what the majority wants from him: Authority has been strengthened, stability established, and the concept of "super power," without which Russians cannot live, is being returned to Russia. He deals with the oligarchs in a manner that befits a czar. But besides the will of the people there is the will of History, and they do not always coincide. Does History want a continuation of Yeltsin's royal democracy? Or does it demand an understanding of what Alexander II saw much too late? - that it is dangerous to begin reforms in Russia, but much more dangerous to stop them. "Russia! Where are you speeding? Answer me!" the great Gogol once asked, in vain. In 1916, in a village above the Polar Circle, where it gets to 40 below, lived an exiled prisoner. He was 38, his wife was dead; he belonged to a pathetic, underground party, with most of its members in prison and the rest fled abroad. He would spend days at a time lying in bed, face to the wall. Who would have guessed that just two years later that exiled Georgian, Joseph Stalin, would be in the Kremlin, ruler of half the world? Who would have guessed that a middle-aged provincial party functionary, Boris Yeltsin, appointed to lead the Moscow Communists, would destroy the USSR just a few years later? Gogol gave the only truthful answer to the question he asked Russia: "It does not answer."

Russia's Real Shadow Economy: $316 Billion in Bribes

July 4, 2006 - Russia Profile - By Dmitry Babich - Three high-level regional officials recently ended up behind bars following a new Kremlin-led anti-corruption campaign. In Tver and Oryol, dozens of lower-ranked officials were also arrested on corruption charges, leaving the local governors' offices almost empty. Most of these arrests were carried out by former Prosecutor General Vladimir Ustinov but his replacement, Yury Chaika, seems inclined to continue the investigations. The Russian government's problems with corruption are nothing new, prompting many observers to question the timing of the Kremlin's anti-corruption drive. "The authorities need a slogan for the upcoming election cycle, beginning with the Duma elections in 2007 and the presidential elections in 2008," said Sergei Markov, director of the Kremlin-friendly Institute of Political Research. "In 1996 the slogan was ‘Stop Communism!' In 2000 and 2004 the campaigns were led by anti-terrorist slogans. Now the likeliest slogan is ‘Eradicate corruption!'" In Markov's view, the drive is strengthened by the popular perception of corruption as the cause of many of the country's woes, including the rash of terrorist attacks in 2004. While police are rumored to have taken bribes from those responsible for the Beslan school siege in order to let their trucks through checkpoints, former airline employees admitted to accepting payment from the suicide bombers who blew up two planes that summer – trading public safety for private gain. Also contributing to the discussion is the fact that most experts agree that corruption payments have increased during President Vladimir Putin's tenure. But the anti-corruption theme does not have to be a losing one for pro-Putin United Russia in the 2007 Duma elections. "The economy grew and so did problems with corruption, which is a natural development," argues Georgy Satarov, president of the Moscow-based InDem Foundation and one of Russia's leading experts on corruption. "Secondly," he continued, "the bribes paid by ordinary Russian citizens did not increase during these years. The increase in corruption falls mostly on businessmen, so an average Russian may not even notice how bad things have gotten." Satarov added, however, that businesses pass the costs of corruption onto their consumers, making Russian products less competitive on the world market and discouraging foreign investment. As part of a study on corruption, InDem conducted polls in 2001 and 2005 that asked questions regarding the number of bribes paid, and the amount. The responses showed that over time people paid fewer, but more expensive, bribes. "There was one case," Satarov said, "when a minor official received $500,000 for opening a sealed storage unit. Just five or six years ago a similar kind of ‘service' would have cost a tenth of that amount." InDem's polls led Satarov to the conclusion that the size of "corruption market" in Russia grew from $33.5 billion in 2001 to $316 billion in 2005. A lot of experts, however, think that Satarov exaggerates the scope of the problem. "Satarov just took the amounts of bribes which ‘his' businessmen paid, and multiplied them by the number of businesses in the country," said Sergei Guryev, director of the Center for Economic and Financial Research in Moscow. "The corruption rates in various branches of the economy are different, so the right approach is to multiply the amount of an ‘average' bribe in, say, the restaurant business, by the number of restaurants." Satarov argues, however, that the size of the Russian economy is bigger than officially reported and, therefore, so is the scope of the corruption. "Of course, the Russian economy is bigger than Goskomstat (The State Statistics Committee) says," Satarov said. "In our figures, we included all kinds of corruption, including hostile takeovers of businesses and preferential treatment for state-owned companies." In Satarov's opinion, the period of transition that from 1991 to the present provides an ample environment for corruption – circumstances not exclusive to Russia. China, whose economy is officially 4 times bigger than Russia's, is believed to have a bigger corruption market, too. "Corruption in Russia is a childish game compared with China's problems," said Vilya Gelbras, a professor of the Institute of the Countries of Asia and Africa at Moscow State University (MGU), and a leading expert on the Chinese economy. "The recent permission to accept businessmen as members of the Chinese Communist party was necessary because the highest party officials also happen to be China's richest businessmen." In Russia, the close relationship between big business and government is no secret to anyone and few believe that all corrupt officials will be brought to justice, but the resumption of anti-corruption arrests after a long period of passivity on the issue inspires hope for greater justice, albeit perhaps selectively applied. "It is very important that people don't get the feeling that the recent arrests of [Nenetsk governor Alexey] Barinov or [Volgograd's mayor Yevgeny] Ishchenko on corruption charges are just a result of squabbles between various interest groups in their regions," said Dmitry Orlov, head of the Agency of Political and Economic Communications. "That is why it is significant that the investigations are conducted by the prosecutor general's office." "In the beginning of his term, Putin hoped that corruption could be curbed by administrative and judicial reforms," added Sergei Markov, "That is why the repressive measures were laid aside for a while. Now that the officials have proved extremely resilient to the reforms, punishments are back in fashion."

Europe must not trade its principles for Russian gas

July 10, 2006 - Financial Times - By Timothy Garton Ash, Dominique Monsi and Aleksander Smolar -
Timothy Garton Ash in professor of European studies at Oxford University; Dominique Mo?si is senior adviser to the Institut Fran?ais des Relations Inter­nationales in Paris; Aleksander Smolar is president of the Stefan Batory Foundation in Warsaw.
On the eve of the summit of the Group of Eight industrialised nations, which opens this week in St Petersburg, Europeans are faced with a delicate balancing act in their policy towards Russia. Should the message be one of trust in a re-emerging power whose energy resources are vital to us, or wariness of a regime whose authoritarian instincts are clearer than ever? Ten years ago, Europeans could recognize themselves in the following motto: "Let's engage Russia if we can, contain it if we must." Today the psychological balance of power has shifted. Russia has regained its pride and sense of confidence while Europe has entered a deep crisis. Because there is more Russia and less Europe in the world of today, the issue is not to "engage Russia in Europe" but for Europeans to "engage with Russia", a subtle distinction made by Dmitri Trenin, a noted Russia expert. The European Union is paralyzed by its inability to escape from the institutional morass into which it was plunged by the French and Dutch rejections of its proposed constitution. In the years to come, it will need to prove it can improve the lives of its citizens and make its voice heard in the world. The time has come for the EU to develop a genuinely European policy towards Russia. While seeking a long-term strategic partnership with its giant Eurasian neighbor, the EU should not hesitate to ask three elementary things of Russia. These strategic requirements are not only good for the future of the European continent; they are also good for Russia itself. The first of these requirements is that Russia should allow its neighbors to determine their own futures. Today's world cannot be one of spheres of influence. The age of Yalta should be behind us. Neo-imperial forms of intervention in countries such as Belarus, Ukraine, Moldova or Georgia are not only anachronistic but harmful to relations between Russia and the EU. Contrary to what is often said by Russian officials, the war in Chechnya is not over, and the behavior of Russian forces there is still, to say the least, very problematic. The second requirement can be expressed in classical terms: pacta sunt servanda. Energy contracts should be clear, binding and respected ­ not least for the sake of Russia's economic future in our globalised age. Russia is in the G8, whereas India is not; but for the majority of shareholders of European steel company Arcelor, the company headed by the Indian Lakshmi Mittal was a more secure, predictable partner than Russia's Severstal. The third strategic requirement has to do with certain minimal standards of legal and political conduct inside Russia's borders. We do not expect Russia to become a model parliamentary democracy overnight but we do expect it not to go backwards towards neo-Soviet authoritarianism. The concepts of "sovereign democracy" or "managed democracy" advanced by Vladimir Putin, Russia's president, remind us of yesterday's concept of "people's democracy". The more you qualify the concept of democracy, the more you run the risk of disqualifying it. As the old joke went, the difference between democracy and "people's democracy" is like that between a jacket and a straitjacket. Europe, more than any other region, needs a stable, law-abiding, increasingly democratic Russia. As all the world will see in St Petersburg this week, membership of the G8 gives Russia's rulers, like the tsars before them, a place at the top table of world politics. Let us now help Russia prove itself worthy of that place, by the higher standards of our time.

Monday, July 03, 2006

Russia and Paris Club sign debt settlement deal

RBC NEWS July 2006 - Russia and the Paris Club of creditor nations have signed a multi-party agreement allowing Russia to pay its remaining debt of about $22 billion to the club. The document was signed by Sergei Storchak, Deputy Finance Minister of Russia, and Jean Cadet, the French Ambassador to Russia. On Thursday, Russian Prime Minister Mikhail Fradkov signed a decree approving agreements reached on June 15 and 16 in Paris, for Russia to repay its remaining debt to the Paris Club, about $22 billion. On June 22, Russian Finance Minister Alexei Kudrin said Russia would fully repay its debt to the Paris Club of creditors by August, 2006. He said Russia would pay $22.3 billion, of which $21.3 billion would be an early payment, $700 million – a planned payment in mid-August, and $1 billion – a premium to the members of the Paris Club. Germany, Russia's largest creditor, would receive $700 million, Kudrin stressed. France, Britain and the Netherlands will also receive premiums. In 2007 alone the federal budget would save $1.2 billion on interest thanks to early repayment, the Finance Minister said. "Thus, in less than one year we will recoup the $1 billion that we will pay as a premium," he said. The debt will be paid in the following way: at nominal value if interest rates are floating or fixed at 15 percent; while 85 percent of the debt with a fixed interest rate will be paid at market value. Kudrin said the funds saved on interest would be transferred to the Investment Fund starting from next year. In 2008, Russia would save $1.1 billion on interest payment, and $1 billion in 2009. In total, Russia will save $7.7 billion. After settling its Paris Club debt, Russia will have only $3 to $4 billion of the Soviet-era debt left, which is owed to countries that are not members of the Paris Club. This debt has been restructured, and it is being paid with equipment supplies, according to Kudrin. Russia's debt to the Paris Club matures in 2012-2015, but in 2004 Russia offered to prepay part of its debt. Negotiations were difficult, with the Paris Club members insisting on a premium and Russia seeking a discount. Russia's total public debt stood at $3.10411 trillion as of January 1, 2006, including $2.22868 trillion in foreign debt and $875.43 billion in domestic debt.

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