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Russia: Debt Talks In London Deadlocked

Prague, 23 October 1998 (RFE/RL) -- Rtor Gerashchenko admitted today that Moscow has what he called "an urgent problem in relations" with private Western banks.

The ITAR-TASS news agency quotes Gerashchenko, who is in London for talks on Russian debts, as confirming that Russia has made offers to Western banks to divide its debts into several groups. He was also reported to have suggested new schedules and terms of payment for each group.

Two months ago (Aug. 17), Russia declared a moratorium on the repayment of 281 billion rubles in treasury bills. At the time, the T-bills were worth about $40 billion. But because of the recent decline of the ruble, they have been reduced to a value of some $16 billion.

No comment was available from Gerashchenko on a report today that Russian officials and the group of six Western banks abruptly cut off their debt-restructuring talks yesterday. The report by the Wall Street Journal Europe said the two sides were far from agreement.

Citing unnamed bankers, the WSJ reported that yesterday's deadlock centered on the question of how much of the debt on frozen short-term treasury bills and bonds Russia would resolve in an initial payment.

The newspaper said that foreign creditor banks, led by Deutsche Bank, had asked that 20 percent be paid in cash. The report also said Russian officials countered with an offer to swap the T-bills for 17-year bonds with an eight-year grace period during which no interest payments would be made.

Meanwhile, Russian Deputy Finance Minister Mikhail Kasyanov, who is also in London for the negotiations, told the Interfax news agency yesterday that talks with foreign holders of the bonds were difficult and may take another day or two.

Kasyanov also said that, by the end of this month, Russia's talks with the Paris Club of government lenders may address the issue of Moscow's payment of debts incurred by the former Soviet Union. He said Russia does not intend to negotiate a new restructuring of the Soviet debt.

In August and September, Russia's Finance Ministry paid only $115 million out of the $800 million of interest due on the Soviet-era debt.