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Russia: Foreign Debt Figures Remain A Mystery




Washington, 1 December 1998 (RFE/RL) -- An official of Germany's Deutsche Bank laughs when asked the size of Russia's total external debt. "The overall figures vary so much I don't want to get involved in that," he says.

Deutsche Bank, one of the world's largest, with commercial loan and investment exposure of more than $1 billion in Russia itself, actually uses the figure of $182.8 billion as its best-guess-estimate of what Russia, publicly and privately, owes the rest of the world.

United Financial Group and the daily Moscow Times put the total outstanding even higher at $195 billion -- $150 billion in state debt and $45 billion in commercial debt.

The International Monetary Fund (IMF) will not release the figures it is using, although in a report before Moscow's splurge of borrowing in 1997 and this year's financial crisis, it put Russia's external debt at the end of 1996 at $125 billion. That included Soviet debt it assumed on the break-up of the USSR and then rescheduled, and $15.4 billion still owed to its old partners in the communist economic and trade group COMECON.

If the United Financial figures are correct, Russia borrowed $70 billion in 1997 and the first six months of 1998 alone.

Russia has not issued an official accounting of all of its external debt, but Deutsche Bank estimates that the largest portion -- $152.8 billion -- is owed by the Russian federation government. It estimates that local and regional governments owe another $1.5 billion and banks and corporations owe $28.5 billion.

Of course, large chunks of this debt do not come due for repayment for years. But significant enough amounts of both official government debt and private commercial bank debt are already due or coming due in the next year at a time when both the government and commercial banks are almost destitute.

The United Financial Group and the Moscow Times put debt due in 1999 at $32.5 billion -- $17.5 billion in state debt and $15 billion in commercial debt.

Deutsche Bank includes the interest as well in its estimates that public and private borrowers in Russia are supposed to pay foreign creditors a total of $49 billion in 1999. The government's share of that bill is $17.5 billion. The seriousness of that figure is shown by comparing it to total fourth quarter Russian federal budget revenues, projected at less than a quarter of that -- or about $4 billion at current ruble exchange rates.

Deputy Finance Minister Mikhail Kasyanov has already said Moscow will be able to pay back less than $10 billion of the $17.5 billion owed through 1999.

Making all of this worse is that Russia's devaluation of the ruble this summer and unilateral debt moratorium and forced rescheduling of much of Russia's foreign debt, has kept most private capital away from the country while encouraging more capital flight by domestic investors. Not to mention the cost when calculated in rubles.

The overall situation is confusing because negotiations on dealing with each part of the debt are conducted with different creditors under different circumstances.

For example, Russia's official debt to commercial bankers is being dealt with in at least two sets of talks going on in London under the so-called London Club, a grouping of about 600 commercial banks worldwide.

The most pressing talks there are over part of the rescheduled Soviet Union debt -- which were instruments called PRINS -- which is due tomorrow, but has a 15-day grace period. Under the rescheduling agreement worked out in 1997, half of what is due tomorrow was to be paid in cash and half in bonds to be called Interest Arrears Notes (IANs). Instead, Russia has now proposed to pay the entire $724 million payment with new IANs said to be worth only about 13 percent of their face value.

Russian officials in Moscow have been quoted as saying there would be an additional $216 million cash interest payment. The Moscow Times reports that Russia does feel an obligation to honor this paper, but the banks involved in the London talks said they had seen nothing on that.

A Deutsche Bank spokesman says this issue may be taken up this week by the negotiators from the banks, but that most of their attention is still focused on the agreement in principle announced two weeks ago on the Russian government treasury notes, known as GKOs. The spokesman said a number of subcommittees of commercial bankers are still working on the Russian offer of a complicated mix of instruments to handle the approximately $10 billion owed on the GKOs to foreign commercial creditors.

There continue to be disagreements among the western banks involved. One group -- those with continuing active business involvement in Russia -- are willing to take more ruble denominated securities which could only be used for transactions with Russia. A second group wants only to get hard currency out as quickly as possible.

Russian official government debt to other countries -- handled through the so-called Paris Club of official creditors -- amounted to more than $50.4 billion at the end of 1996, but that is nearly covered by the more than $47 billion other countries owe Russia. Most are Soviet-era debts owed by poor, developing countries.

Russia's other big foreign debt is what it owes the International Monetary Fund (IMF), the World Bank and the European Bank for Reconstruction and Development (EBRD), totaling more than $25.5 billion.

Russian officials last week suggested they might ask the IMF to "reschedule" what Moscow is due to repay the fund in 1999, but IMF officials have made a point of underscoring that the fund does not and will not reschedule debt owed by member countries.

IMF officials will not say exactly how much Russia is due to repay in 1999 -- it has kept up its repayments so far on a total debt of $19.580 billion -- but United Financial estimates that $4.8 billion is due next year. IMF officials point out that the repayment schedule is heavier in later years because of grace periods in some of the loans.

(Floriana Fossato in the Moscow bureau contributed to this report.)

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