Russia to seek 75% cut in debt

Russia is to ask foreign creditors for a 75 per cent cut in its Soviet-era debts, according to First Deputy Prime Minister, Mr Yuri Maslyukov.

"We are in a condition to pay the debts of Russia," he told the Financial Times this week.

"But we are not in a position fully to pay the debts of the Soviet Union. We would like them to forgive 75 per cent of the debt of the Soviet Union."

The government is seeking approval for its economic plans from the International Monetary Fund (IMF), which would open the way for the start of negotiations with the Paris Club of sovereign creditors and the London Club of commercial lenders.

A broad agreement with the fund, struck between Mr Maslyukov and IMF head Mr Michel Camdessus on Monday, was the first step, although final details are to be worked out during the visit of an IMF mission next week.

Previously, the government has held consultations with foreign creditors on cutting its debt rather than negotiations.

The government has repeatedly said it wants relief on the Soviet debt, which amounts to about $100 billion (#93 billion), after it became a huge burden after the summer rouble devaluation.

Mr Maslyukov's comments were the first time an official has directly mentioned the volume of the discount Russia would like to get although a figure of 50 per cent had been hinted at by some.

The government promised to fully service its post-Soviet debt, mostly Eurobonds and debt to the International Monetary Fund.

Unlike many countries, Russia did not ask for any debt reduction when it signed restructuring agreements with the creditors after the 1991 collapse of the former Soviet Union.

However, the creditors' clubs tend to write off debts to countries which implement market reforms successfully whereas in Russia the reforms have been stop-start.

Mr Maslyukov said the government was ready to be flexible in a debt restructure, which would be the second one the country has negotiated. The last one ended only in 1997.

"I think the figure might not be 75 per cent - it might be a little less," Mr Maslyukov said.

"But all the economists of the IMF, the World Bank, and the experts of the Paris Club understand we cannot [pay all Soviet debt] no matter what they may want of us."