Assuming the London Club deal is ratified (as seems likely) attention will shift to Russia’s Paris Club negotiations, which are expected to start after the presidential elections. Unofficial estimates of Russia’s Paris Club debt (which comprise the bulk of the US$68 billion owed to official creditors at the end of 1998) range from US$38 billion to US$42 billion. In August 1999 the Paris Club concluded an interim rescheduling agreement with Moscow, according to which payments on some US$8.0 billion in obligations coming due during 1998-2000 have been postponed until the second half of 2000.
Although Acting Prime Minister Mikhail Kasyanov has indicated that he will press for terms similar to those agreed with the London Club, the Paris Club negotiations could well be more protracted. Germany, which holds some 70 percent of Moscow’s Paris Club obligations, has taken a hard line against substantial debt relief for Russia. Moreover, in contrast to negotiations with the London Club–whose members are primarily interested in generating some cash flow from their Russian exposure–political factors are likely to play a major role in the outcome of the Paris Club negotiations. The Paris Club is dominated by the G7 governments that seem to be viewed by Russia’s ascending military and security apparatuses as dangerous threats to Russian interests. Prospects for a Paris Club restructuring could be held hostage to tensions between Russia and NATO on such issues as strategic missile defense, Chechnya, joint peace-keeping efforts in Kosovo, or the Baltic states’ accession to NATO. They may also depend on straightening out Moscow’s strained relations with the IMF, which since September has been withholding the second US$640 million tranche of the US$4.5 billion standby credit negotiated last July.
POLITICAL DIALOGUE, RIP.