Publication: Monitor Volume: 4 Issue: 198

Aleksandr Zhukov, head of the State Duma’s budget, tax, banking and finance committee, said Monday (October 26) that it was “unrealistic” to hope that Russia could make the whopping US$17.5 billion payment due next year on its foreign debt. “There is not much of a chance the budget will be able to cover these payments, therefor debt restructuring talks must be held,” Zhukov said. He noted that during the first nine months of 1998, federal government revenues were only 51 percent of what had been planned. A Russian delegation headed by Deputy Finance Minister Mikhail Kasyanov is set to meet today and tomorrow with members of the Paris Club of creditors. Last September, Russia was able to pay only US$115 million of an US$800 million installment owed to Germany and other Paris Club members.

Meanwhile, problems persist in the negotiations which have been taking place in London between Russia and Western banks whose investments in Russian state securities were frozen last summer. A number of Western banks have declared a moratorium on providing any information to the Western or Russian media about the course of the negotiations. An anonymous Western bank representative told Russian agencies yesterday that the news blackout was “a temporary measure called for given the large level of uncertainty in the Russian economy at the moment and also the large number of rumors circulating on the market.” One of the creditors, Deutsche Bank, had earlier announced that the negotiations were not going well, and last week there were reports in the Western press that the talks had been broken off. Russian government securities worth approximately US$17 billion at current exchange rates were frozen last August, when the government of then-Prime Minister Sergei Kirienko declared a 90-day moratorium on payment of GKOs–short-term treasury bills–and other government paper. About a quarter of these securities were owned by non-residents (Russian agencies, October 26). According to one estimate, Western investors lost as much as US$100 billion due to the collapse of the GKO market and concomitant crash of the ruble and the Russian stock market.