Russia has reached a deal with the Paris Club of creditor nations on the early repayment of its $22 billion debt in principle but will continue to negotiate over the premium payment, the country's Finance Ministry spokesman told Reuters on Saturday.
"Negotiations took place, the plan under which Russia will pay its Paris Club debt in full has been agreed in principle," Finance Ministry spokesman Pavel Kuznetsov told Reuters. "The scenario on the agenda implies that Russia will no longer be a Paris Club client," Kuznetsov said.
However, Kuznetsov said the negotiations over the terms of the payment will continue. "The question about the premium is a subject for further discussion," he said. A source close to negotiations told Reuters that the talks may take another two weeks.
The German economy ministry retracted a statement it issued on Friday that the Paris Club of creditor nations had agreed to allow Russia to repay all of its debt early, a German ministry spokesman said. "That was a mistake on my part," the spokesman said, adding that negotiations were still underway.
The ministry said earlier that a deal had been struck and that Germany would get a special payment of 700 million euros ($886.4 million) as compensation. The Paris Club issued its own statement about the negotiations, which implicitly confirmed that there was no deal.
"Substantial progress was made on the proposals. Consultations are continuing," the Paris Club said. A Russian official spoke in a similar tone. "The negotiations are not over yet and will be continued at the nearest time," a Russian government official familiar with the talks told Reuters on condition of anonymity. "Consultations will be continued in the upcoming days."
Germany, Moscow's largest creditor, has been reluctant to accept early payment of 6.4 billion euros of debt it had used to back a German issue of "Aries" credit-linked notes in 2004. The German finance ministry said Finance Minister Peer Steinbrueck "welcomed progress in the negotiations." Financial market analysts had also hailed the now-retracted announcement of a deal, saying it was good news both for Russia and investors holding the Aries notes.
"It is fantastic news," said Tim Ash, emerging market economist at Bear Stearns in London. Russia, the world's No 2 oil exporter, has gathered $71.8 billion in windfall revenues in a budget stabilisation fund, putting Moscow in a strong position to pay down the costly debts it assumed after the Soviet Union collapsed in 1991.
It had been pushing to repay the entire outstanding $22 billion it owed to the club's creditors after having pre-paid $15 billion in debt at par last year but Germany had been reluctant to accept early payment and lose revenue streams.