Schroeder in Russia for debt talks

Schroeder and his wife Doris (left) were met by Lyudmila Putin

The German Chancellor, Gerhard Schroeder has arrived in Moscow on what is officially a private visit.

But his stay is likely to be dominated by the question of Russian debt repayments.

Mr Schroeder has been invited by President Vladimir Putin to celebrate the Orthodox Christmas on Sunday.

However, correspondents say the two will spend much of their time discussing Russia's announcement on Friday that it plans to delay its scheduled payments to the Paris Club of industrial nations.

Russia owes nearly $50bn - 40% of it to German banks.

Some reports say there are proposals to convert all or part of the debt into shares in Russian companies.

Personal ties

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

Putin is committed to clearing Russia's debts

BBC Russian affairs analyst Stephen Dalziel says Mr Putin's relations with Mr Schroeder are becoming almost as close as his friendship with UK Prime Minister Tony Blair.

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

Germany is owed a greater share of Russia's foreign debt than any other creditor, and Russia has 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.

Russian or Soviet debt

But amid the personal camaraderie, Mr Schroeder will be looking for some indication 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. Reports suggest he will propose that some of the debt owed to Germany could be transferred to debt-equity swaps, under which 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.