Egypt and Russia Agree to Debt Deal

CAIRO -- Egypt and Russia signed an accord Thursday settling 950 million Egyptian pounds ($280 million) of commercial and military debts between the two countries.


The agreement, signed by Russian Deputy Prime Minister Oleg Davydov and Egyptian Minister of Economy and Foreign Trade Mahmoud Mohammed Mahmoud followed three years of talks.


Egypt owes Russia for military hardware it acquired in the 1960s and 1970s and for industrial equipment for Russian-designed factories. Russia owes Egypt for cotton, clothes, citrus fruits and chemicals.


"The deal we have signed today settles all military and civilian debts. We consider this agreement a positive turning point," Mahmoud told a news conference after the signing.


The two ministers declined to give details of the deal, but a statement by the Egyptian ministry said it covered debt of ?950 million ($1,524).


Implementation of the agreement, described by an Egyptian official as "an old-fashioned barter deal", will take place gradually and will be completed by the year 2010, it said.


Negotiations dragged on for years because of complicated exchange rates used in the past by both countries and because of the debts themselves, many inherited from the Soviet Union.


"The agreement works out all debts on both sides. I don't want to give you a figure because there are many details. (Some) debts were in sterling accounts, and some in Egyptian pounds," Mahmoud said.


The two countries have also agreed to set up a joint committee to encourage trade and investment, which has fallen off sharply since the collapse of the Soviet Union.


They agreed to set up an insurance company to guarantee imports and exports, and the ministry statement said they also discussed measures to eliminate double taxation. "Egypt and Russia are going through similar economic reforms," said Davydov, speaking through an interpreter. "The aim is to help small and medium-sized companies in both countries."


Davydov, who was promoted Wednesday to deputy prime minister, said he would continue working as Russia's chief debt negotiator and said his country would honor its foreign debts.


"All the credits taken by Russia will be repaid," he said, adding that talks with creditors would take into consideration "the economic situation in Russia in the transitional period."