Банкеръ Weekly

Briefs

RULING CIRCLES AND OPPOSITION AT LOGGERHEADS ABOUT RUSSIA'S DEBT

Tension between the ruling circles and the opposition built up after the end of negotiations for the settlement of Russia's debt to Bulgaria. After one-week disputes during the seventh session of the Bulgarian-Russian Intergovernmental Commission, held in Sofia February 18-23, the Russians acknowledged its USD132MN liabilities to Bulgaria. This amount, however, was reduced to USD98.5MN at the expense of Russia's unsettled financial claims to Bulgaria.Ultimately is was agreed that the USD98.5MN debt should be repaid within three years, during which Bulgaria would get USD88.5MN - in cash, in the form of nuclear fuel supplies, and in spare parts for the military aviation.We have managed to close down a page in Bulgarian-Russian relations, which the previous government did not do for seven years. This is the first step in melting the ice between the two countries, Bulgaria's Deputy Finance Minister Krassimir Katev said, commenting a long-standing dispute with Russia over Moscow's debt to Sofia. Mr. Katev said he hoped a final debt agreement with Russia would be signed during President Georgi Purvanov's first visit to Moscow. Bulgarian analysts said the rate of debt recovery - 67 per cent, or USD132.5MN, was high, compared to the other east European countries. The Czech Republic, for example, negotiated 20% rate of debt recovery, and Hungary and Poland did not get more than 31 per cent. Mr. Katev explained that under the previous 1995 agreement (reached by the government of the then premier Zhan Videnov) Russia's debt to Bulgaria was estimated at USD100MN and was to be repaid by supplying equipment worth USD52MN to Bulgaria's largest iron and steel works Kremikovtsi, and USD42MN worth of military supplies. Were the well-known discount schemes applied, the USD100MN debt would be presently evaluated at USD15MN, and we succeeded to agree on getting much more, Mr. Katev pointed out. He announced that Russia will pay USD15MN in cash by June 2002, thus settling a USD25MN debt. Nuclear fuel worth USD35MN will be supplied to the Nuclear Power Plant of Kozlodoui as well. In 2003 the N-plant will receive fuel worth USD14.5MN. From mid-2002 till end-2003 spare parts worth USD24MN, complying with NATO standards, will be delivered to the Bulgarian military aviation.My appraisal about the reached agreement is negative. This is Russia's stance in the form of a contract. The total amount we have claimed from Russia over the past seven years of negotiations exceeds USD350MN. The incumbent Government has not achieved much by pursuading the Russians to repay USD88.5MN only. During our last negotiations in February 2001 Russia proposed something like the present agreement - we were offered to pack all our claims within USD90MN, the former deputy finance minister Plamen Oresharsky (who was holding all foreign debt negotiations in the past four years), commented. According to him, his successor Katev wrongly interprets the USD100MN Russian debt, agreed in 1995, saying that its current value is USD15MN. Mr. Oresharsky explains that Mr. Katev is calculating the discount at a 10% annual interest rate, while it should be calculated at BNB's interest rate for the Government's deposits in the fiscal reserve - between 2.5% and 3% per year.Within seven years nobody ventured to sign an agreement with Russia at such terms. I have also recommended that those conditions should not be approved and I'd not accept them at present either, Mr. Oresharsky said. Krassimir Katev, however, rejects his predecessor's arguments and claims he has succeeded to solve a very complicated debt problem, which has been impeding the Bulgarian-Russian economic relations for quite a long time.There were many controversial issues regarding the settlement of Russia's debt to Bulgaria due to the agreements reached in 1995. For instance, the Russians claimed we should pay them for the machines and equipment worth USD52MN, built by Uralmash for Kremikovtsi. According to them, the Russian Ministry of Finance had subsidized Ural's plant by USD25MN for the purpose. Due to these and other financial claims we had to reduce Russia's debt to USD98.5MN, and we'll get in fact USD88.5MN, Mr. Katev complained.At the same time he announced that the debt agreement has not been bound with the settlement of the disputable issue regarding Russia's dimplomatic real estate in Bulgaria or with the ownership on some Bulgartabac factories in Russia. Mr. Katev is adamant that the achieved debt agreement only settles the claims under all bilateral agreements between Bulgaria and the former Soviet Union. He specified that Russia owes Bulgaria USD2.9MN under the Yamburg agreement, and transferrable roubles 28MN under the petrol and gas for construction work swap of 1969.Under the agreement for lumbering in Komi, it turned out that we are indebted to Russia for inflicted environmental damages. However, Bulgaria withdrew its claims to Russia regarding the construction of the ore-mining facility Krivoy Rog, but we have retained our right to lay claims to third countries, the Deputy Finance Minister admitted. According to Plamen Oresharshky, however, the sums under individual bilateral agreements are quite different.Under the Yamburg agreement, Russia owes Bulgaria USD55MN for construction work done by 1991. But the Russians insist that we should seek most of this money from the Ukraine. This was the stance of the Russian Finance Minister Kolotouhin and Mr. Katev had obviously not agreed with him. According to me, however, Russia inherits all liabilities of the former Soviet Union and should not direct us to the Ukraine. Does Mr. Kolotouhin tell the Paris Club creditors to seek their money from Russia?, Plamen Oresharsky commented in front of the BANKER weekly.Accoring to the former deputy finance minister, Russia claims USD80MN-plus in environmental damages under the agreement for lumbering in Komi, but Bulgaria should also demand USD1140MN for its equipment, left in Komi. Mr. Oresharsky believes that the incumbent Government should not give up its financial claims from Komi. The same holds true about Bulgaria's receivables from Krivoy Rog in the former Soviet republic of Ukraine.Bulgaria's share participation there is worth USD24MN and the Government should ask them from Russia, despite of the fact that the facility is on Ukraine's territory, Mr. Oreshaksy is adamant.Some financiers, acquainted with the negotiations about the settlement of Russia's and Ukraine's liabilities to Bulgaria, believe that the Government will wait for the Ukraine to pay back its debts to Bulgaria (accrued after 1991) by natural ags deliveries, and will afterwards lay on the table the Krivoy Rog issue. Its settlement is quite complicated as the case in point does not concern receivable of the Bulgarian Finance Ministry only.

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