Tigers Put on the Debt Swap Block

While Prime Minister Mikhail Kasyanov was in Rome on Tuesday touting Italy's decision to take up Russia's offer to trade debt for investment benefits, a rather wilder swap was being offered in Moscow: debt-for-tigers.

The World Wildlife Fund, a prominent international environmental watchdog dedicated to conserving nature, proposed that Russia agree to a scheme that would help reduce its burdensome $40 billion debt to the Paris Club of creditor countries.

Under the scheme, Siberian tigers, snow leopards, black swans and other endangered species would benefit from environmental programs financed with the help of Paris Club nations — as long as those nations are willing to accept part of Soviet-era debt in the form of cleaner air and more abundant wildlife, said Renat Perelyot, an ecologist at the Institute of Systematic Analysis, which is an arm of the Russian Academy of Sciences.

"Unlike in the debt-for-shares scheme, where the country gives up its assets, our plan is advantageous for the debtor as well as for the lender," he said.

Perelyot was referring to an offer Russia originally made to Germany, which accounts for some 40 percent of what it owes the Paris Club, to pay back a portion of this debt in exchange for equity in Russian enterprises, tax breaks or other investment benefits.

"In Italy we have at least one project in operation using the scheme and it's quite successful," Reuters quoted Kasyanov as saying Tuesday, adding that the project was in the range of $40 million to $70 million. Kasyanov later told Italian businessmen that he was referring to the joint development of a Yakovlev training aircraft, Yak-130, Reuters reported.

"We have signals from a few big companies in Europe to undertake those efforts," he said. "In our view, the mechanism is very simple: The Russian government finances investment by Italian businessmen on Russian territory in exchange for the investor buying out part of the former U.S.S.R. debt from the Italian treasury."

Bolivia, Costa Rica, Ecuador and Mexico are among dozens of other countries using similar debt deals.

Paying down debt by developing an aircraft is one thing, but paying down debt by developing a nature reserve? Why would creditor countries be interested in improving Russia's environmental situation instead of receiving cash payments or investment incentives?

"So in return they could have air to breathe, water to drink, and places to go to during vacation," said WWF's development director Irina Prokhorova.

Prokhorova and other WWF officials insist that while the scheme would cancel out only a small portion of what the country owes international lenders, it could still account for as much as $100 million in debt relief.

"We are not talking about a lion's portion," said Alexei Kokorin, a coordinator of WWF programs in Russia," adding that Russian ecological programs could gain tremendously from the program.

If the idea sounds far-fetched, consider this: It has already worked for several other countries with mounting external debt and an atrocious environmental record.

Take Poland, for example. In 1991, when an $18 billion debt threatened the government's reform program, it approached the Paris Club with a proposal to restructure its debt and spend 10 percent of it on ecological projects.

With other conditions, the creditors agreed, and as a result Poland's ecological fund swelled to about $470 million by 1995, which it allocated to more than 240 environmental and conservation projects.

Bolivia, Costa Rica, Ecuador, the Philippines and Mexico are among more than a dozen countries running similar programs.

Perelyot said that in a successful debt-for-nature scheme an international nongovernmental organization like WWF first has to get the rights to a portion of the debt from creditor nations. Then, he said, the organization has to negotiate with the Russian government to receive compensation for the redeemed debt, with the condition that all funds it receives would go to ecological projects such as conserving biological diversity, protecting migrating birds and financing anti-poaching brigades.

WWF originally sent then-Deputy Finance Minister Kasyanov such a proposal two years ago, to which he replied that the government wasn't ready to discuss concrete debt-reduction ideas, Prokhorova said.

But now that Kasyanov is running the government and making headway with the Paris Club through creative schemes like the one just announced in Italy, the WWF is hoping he will take another look at its idea.

At this stage, however, there are more doubters than believers.

"In an ideal world this would be wonderful, but it is thoroughly unrealistic under the current circumstances," said Eric Kraus, chief strategist at NIKoil.

http://www.wwf.ru/ The World Wildlife Federation