Nando Times

Russia's debt-payment problems are temporary, Putin says

By JUDITH INGRAM, Associated Press

MOSCOW (January 19, 2001 10:31 a.m. EST http://www.nandotimes.com) - President Vladimir Putin said Friday that Russia's debt payment problems were temporary, but he gave no indication the government would cease its efforts to postpone payments.

"Russia has never refused and will not refuse to fulfill its financial obligations before creditors," Putin told a Kremlin meeting of top finance officials, according to the Interfax news agency.

Putin and other officials have, however, pressed to put off payments on Russia's Soviet-era debts to the so-called Paris Club, which includes some of the world's richest countries. Russia owes about $48 billion to the group, with the biggest chunk due to Germany. Russia is scheduled to pay the Paris Club about $3.5 billion this year.

Finance officials have pointed out that the 2001 budget - Russia's first balanced budget since the Soviet collapse - does not earmark funds for debt payments. Moreover, they say that unusually cold temperatures this winter have caused unforeseen expenditures.

Putin said Friday that it would take two to three weeks to clear up the "technical, temporary" problems that were preventing Russia from making scheduled debt payments.

But he hinted that the government might miss some debt payments this year.

"We should proceed from the reality in which we live, we must fulfill the budget law and fulfill social obligations to the population," Interfax quoted Putin.

"This means that, on the one hand, we will not take any one-sided steps, but the government should very soon boost its work with the State Duma (lower house of parliament) and our partners in international financial organizations and the Paris Club."said.

Russia's creditors and some Russian economists have criticized the government for attempting to put off debt payments to the Paris Club. Earlier this week, a senior German finance official said that Russia's behavior could hurt its chances of becoming a full member of the Group of Eight leading industrial nations.

The Russian government enjoyed unexpectedly high revenues from soaring oil prices in 2000, but is worried that an expected fall in world oil prices will drain government coffers.

Since the 1991 Soviet collapse, Russia has paid its post-Soviet debts on time. However, it has tried repeatedly to reschedule its Soviet-era debts, which make up about two-thirds of Russia's total $148 billion in foreign debt.

Despite Putin's assurances that Russia is a good borrower, up to $1.6 billion falling due in January and February is almost certain to go unpaid as officials try to negotiate rescheduling of the debt. And Russia has defaulted several times over the past decade, including its default on about $70 billion of Soviet-era debt during the August 1998 economic crisis.

-- Rachel Gibson (rgibson@hotmail.com), January 19, 2001