Original source URL: http://www.itp.net/business/news/details.php?id=21725 This news article was printed from ITPBusiness.net Sunday, 27 August 2006 Putin pays off debt as economic clout rises by Gabriel Rozenberg (•••@••.•••) Russia has finally paid off its Soviet-era debts to the Paris Club of wealthy nations in a dramatic display of the country¹s new-found economic clout. The repayment of US$22.5bn that Russia¹s Vnesheconombank made last Monday was the largest-ever repayment to the Paris Club of 17 creditor countries. Analysts said that ratings agencies would upgrade Russia¹s sovereign rating after the clearest sign yet of President Putin¹s determination to use the soaring value of Russian oil to clean up his country¹s reputation on the financial markets. The move knocked about a third off the country¹s foreign debts, which previously stood at US$70bn. Russia had been due to pay off the debts by 2020, but the sharp rise in the price of oil has engineered a dramatic improvement in the country¹s fortunes. That enabled it to bring the repayment forward, at an estimated saving of US$12bn. Under the terms of a deal agreed in June, Russia also agreed to pay a premium of US$1bn to compensate the creditors for lost interest. In its budget provisions, Germany, the biggest creditor, had allowed for the debt to be unpaid until 2015. Mr Putin said: ³We used to live with our hand held out for many years ... but now the Russian economy cannot only repay debts but do so ahead of time.² The Finance Ministry said that the repayment would reduce Russia¹s foreign debts as a share of GDP to just 9%. ³The early repayment to creditor nations was made possible by growth in the economic and financial might of Russia,² it said. ³Repaying the entire sum . . . will facilitate a strengthening of Russia¹s international authority as a state with significant financial reserves and stable borrowing.² Christopher Green, senior economist at the Moscow Narodny Bank in London, said that the move had political implications as well as making economic sense. ³It reflects the emergence of Russia as an economy on to the global stage,² he said. Russia, the world¹s second- largest oil exporter, has enjoyed a marked turnaround in its fortunes since its US$40bn domestic debt default and rouble devaluation in 1998. At that time the price of oil was below dollars 13 a barrel, compared with nearly dollars 72 a barrel last Monday. Two years ago, Russia set up a budget stabilisation fund to insulate it against fluctuations in the price of oil. Over the past year the country has redeemed more than dollars 40billion of debts. In another sign of strength, the rouble was made fully convertible at the start of July, a full six months ahead of schedule, - in a move which caught many watching experts by surprise. © 2006. ITP Online Ltd. -- -------------------------------------------------------- Escaping the Matrix website http://escapingthematrix.org/ cyberjournal website http://cyberjournal.org subscribe cyberjournal list mailto:•••@••.••• Posting archives http://cyberjournal.org/show_archives/ Blogs: cyberjournal forum http://cyberjournal-rkm.blogspot.com/ Achieving real democracy http://harmonization.blogspot.com/ for readers of ETM http://matrixreaders.blogspot.com/ Community Empowerment http://empowermentinitiatives.blogspot.com/ Blogger made easy http://quaylargo.com/help/ezblogger.html
