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Russia Agrees to Start Iraq Debt Forgiveness Talks - 2003-12-18


Russia has agreed to start talks aimed at forgiving some of Iraq's $8 billion debt to Moscow after a meeting between Russian President Vladimir Putin and U.S. envoy James Baker.

President Putin says he is ready to discuss forgiving some of the debt, within the framework of the Paris Club of international creditor nations.

Mr. Putin made the pledge in a statement issued by the Kremlin after the Russian leader met former Secretary of State James Baker, who's on a weeklong tour to discuss how to relieve Iraq of its $120 billion debt.

However, Mr. Putin also said that Russia "would be guided by its national interests" in considering the request to lift some of Iraq's debt burden, without going into more detail.

Russia is one of Iraq's largest creditors, along with Japan. And until just a few days ago officials in Moscow had rejected calls from the United States to forgive the debt.

Last week, senior officials stated that as a major oil-producing nation, Iraq does have the ability to repay its debt over time.

Moscow officials were also angered after the Pentagon said that Russia and other countries that opposed the U.S.-led war against Iraq would not be able to bid for contracts in the country's reconstruction.

But Russia softened its stance after Mr. Baker began his trip with stops in European countries that included France and Germany.

Both nations joined Russia in strongly opposing the U.S.-led war against Iraq and are also locked out of making contract bids.

However, leaders in both countries have also agreed to forgive, or at least restructure, Iraqi debt within the "Paris Club" of nations that coordinates debt repayments.

Russian Finance Minister Alexei Kudrin says the terms of the Paris Club provide for a mechanism to help restore Iraq's shattered economy along with the International Monetary Fund.

Mr. Kudrin also took part in the meeting between Mr. Putin and Mr. Baker.

Most of the $8 billion owed to Moscow is left over from close financial links the Soviet Union had with Iraq, in particular for purchases of arms during the Iran-Iraq war in the 1980's. Senior Soviet officials had close links with ousted Iraqi leader Saddam Hussein prior to the first Gulf War in 1991.