Schroeder visit tackles Russian debt

Gerhard Schroeder says Russian visit is to strengthen personal ties

By Russian affairs analyst Stephen Dalziel

German Chancellor Gerhard Schroeder is making a private visit to Moscow to see Russian President Vladimir Putin.

Both leaders insist that the visit is part of an important process of strengthening their personal ties.

But there is also the serious economic matter of Russia's foreign debt to be discussed.

Mr Putin's relations with Mr Schroeder are becoming almost as close as his friendship with British Prime Minister Tony Blair.

Economic interest

Mr Blair has made two brief visits to Russia to see Mr Putin, and this visit is Mr Schroeder's second, too.

But while both Britain and Germany are keen to encourage greater trade with Russia, Germany has a more acute economic interest in Moscow.

Germany is owed a greater share of Russia's foreign debt than any other creditor, about half of the $48 billion which Russia owes to the Paris Club of creditors.

And Russia has just announced that it is unilaterally delaying payment of the next tranche of $3.5 billion, which it was due to meet this year.

Moscow insists that negotiations are in progress with the Paris Club, and that this is not a default on its payments.

Soviet debt

But amongst the personal camaraderie, Mr Schroeder will want some suggestion from Mr Putin that this is merely a temporary setback.

Some Russian politicians have suggested that Russia should renege on the bulk of its foreign debt, as it - and, by extension, the interest on it - was incurred by the Soviet Union.

Mr Putin does not adhere to this view. He is expected to pursue the line with Mr Schroeder that some of the debt owed to Germany could be transferred to debt-equity swaps, whereby Germany could take stakes in Russian companies.

This idea was discussed in Berlin last month by Russian Prime Minister Mikhail Kasyanov.

The German business newspaper Handelsblatt has suggested that Russia has already drawn up a list of several thousand companies which could take part in the scheme.