Zee Beam News

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.