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. Last Updated: 07/27/2016

Premier Says Russia To Pay Tsarist Debts


Prime Minister Viktor Chernomyrdin said Monday that Russia would pay its tsarist-era debts after the Paris bourse suspended trade in the pre-revolutionary bonds.

"What a memory!" Chernomyrdin exclaimed, when asked whether Russia would pay the debts. "We will. I think today we will resolve this question. We will because we are Russia. We will pay all our debts," he told reporters before leaving for Paris for two days of talks on closer economic ties.

The tsarist debt dispute clouded Russia's return to the international capital markets last week with an oversubscribed $1 billion Eurobond.

Russia has reached debt rescheduling agreements with the Paris and London Clubs of country and commercial bank creditors.

However, the row over tsarist bonds is seen as an obstacle to Russia joining the Paris Club as a creditor, a move which would allow it to negotiate the return of Soviet-era debts owed to Moscow, mainly by developing countries.

French investors bought many of the bonds, issued between 1822 and 1913, to fund projects like the Trans-Siberian railway. But the Soviet government refused to meet any obligations of its tsarist predecessor, leaving thousands of French savers holding beautiful but virtually worthless paper.

The successors of the original French buyers are claiming back some 140 billion to 160 billion francs ($27.4 billion to $31.3 billion), including interest unpaid since the 1917 revolution.

On Monday, Paul-Louis Tenaillon, head of a study group on payment of the debt, said the issue of compensation for the bondholders "is on the agenda" for Chernomyrdin's visit to France.

France has banned its financial institutions from making any loans to Russia until the issue of the outstanding debt has been resolved.

It was not clear how much Moscow would be prepared to pay, but Chernomyrdin said the question of when the debt would be paid would be discussed.

Moscow has argued that any liability for tsarist-era debt must be offset against the seizure in the West of Russian assets, which were used to help fight the communists.

Earlier, the Paris bourse suspended trade in the debt. "Because of rumors relayed by various information services relative to Russian loans, the listing of these is provisionally suspended from today," it said in a statement. French Finance Minister Jean Arthuis and Foreign Minister Herve de Charette were to meet representatives of the French bondholders on Monday to discuss their negotiating position.

Before Russia issued its Eurobond last Thursday, French bondholders took out advertisements urging investors not to buy.

Russian Deputy Finance Minister Mikhail Kasyanov, responsible for foreign debt, left with Chernomyrdin to discuss the tsarist bonds.

Chernomyrdin also was to be accompanied by four ministers including deputy prime minister in charge of external economic relations, Oleg Davidov, Agriculture Minister Victor Khlystun, Energy Minister Pyotr Rodionov and Communications Minister Vladimir Bulgak. The first session of the committee was held in February in Moscow.