Russia to Repay Debt Early Despite German Resistance

"This year we plan to repay in full our debt to the Paris Club," Vladimir Putin told a Russo-German business forum that he attended along with visiting German Chancellor Angela Merkel in the Siberian town of Tomsk. "We hope that Germany, among other countries, can profit from our proposal."

Putin did not say how much Russia's Paris Club debt was at present. The Paris Club said in March 2005 that the Russian debt stood at around $40 billion (32.2 billion euros). Russia has since repaid $15 billion, leaving a balance of around $25 billion. The Russian finance ministry in October however put the debt at $29.8 billion.

Russia, flush with cash from soaring energy prices, has already prepaid debts to the International Monetary Fund and has long sought to retire the Paris Club debt ahead of schedule.

Its efforts however have so far been slowed by resistance from some creditor countries demanding that Russia pay a premium to compensate them for the lost interest that early debt repayment would entail. Germany, which converted around $7 billion of Russian debt into government bonds, has in particular resisted Russia's offers to prepay the Paris Club debt.

Putin said however that last August Russia reimbursed a $15 billion chunk of debt to the Paris Club, including around $6 billion to Germany.

"It appears this strengthened trust among German business groups in their Russian partners," Putin said. It was unclear if Putin's proposal signaled that Germany had endorsed the debt prepayment initiative.

Putin: Russia will stick to gas deliveries

Putin meanwhile reassured Merkel that Russia would stand by its commitments to supply gas to Europe.

"The Russia side underlined many times that there was no reason for worry," said a Kremlin spokesman.

"Gazprom as a company has never broken its commitments," he added, referring to the state-controlled gas company, which had hinted it could look for customers in Asia if Europe does not open its market to the Russian energy giant.

A source in the German delegation confirmed that Putin and Merkel had stated their commitment to stability in energy supplies, the respect of contracts and the development of energy ties between Germany and Russia.

Putin and Merkel were expected to focus on the Iran nuclear crisis in their talks today before the chancellor heads back to Germany.