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. Last Updated: 07/27/2016

Russia Nears Tsarist-Bond Deal

Russia, about to issue its first sovereign bond since 1917, says it may be close to a deal to appease millions of savers whose turn-of-the-century investments were swallowed by the revolution.


The mainly French savers, who have been clutching beautiful but virtually worthless tsarist-era bonds for more than 70 years, argue that Russia owes them $30 billion.


When the Bolsheviks took over, they refused to pay back the bonds, which had been placed in France starting in 1880 to pay for railways and other projects in the Russian empire.


Many people put their life savings into what they considered to be a solid investment and were bankrupted by the default. The elaborately decorated bonds became curios, although prices went up after the collapse of communism in 1991 raised the prospect that they might become more than collectors' items.


Moscow, mired in a post-communist economic crisis, has previously rejected the French claim.


But Tuesday, Itar-Tass quoted Finance Minister Alexander Livshits as saying negotiators were close to a deal, although he said the details had not been worked out.


It took the Soviet Union six decades to recover investors' confidence enough to borrow abroad, and even then it was forced to do so via its foreign trade bank, Vneshekonombank.


The cash-strapped Russian government, anxious to tap international markets by issuing a Eurobond, took over responsibility for Soviet debts with the collapse of the superpower in 1991.


It has not made its position on tsarist debts clear, but any outstanding debts might affect the issue and certainly raise questions about Russia's credit-worthiness.


Moscow will launch a so-called "road show" for its Eurobonds this month in major world financial capitals. Any protests by the pre-revolutionary bondholders could mar the presentations and put off investors.


Livshits said Russian and French negotiators had agreed that repayment would be a "symbolic gesture."


"However, representatives of the sides put different interpretations on this," Itar-Tass quoted Livshits as telling a meeting of Russian newspaper editors.


Livshits said the exact sum and conditions of the payback had not yet been worked out, but he said an agreement was close. A new round of bilateral negotiations is planned for the end of November, Itar-Tass quoted him as saying.


Livshits said sorting out the debt was important because it would allow Russia to enter the Paris Club of government creditors, where it could negotiate a return of outstanding debts to the old Soviet Union from developing countries.


"For us, this is a crucial issue because its resolution will finally remove the obstacles to Russia's entry into the Paris Club," Itar-Tass quoted Livshits as saying.


Livshits said Moscow -- which estimates it is owed $100 billion -- could get at least $2 billion in clear profit a year. "It would be pure money," he said.


Moscow is rescheduling $55 billion of Soviet-era debts to the countries grouped in the Paris Club and the $35 billion it owes foreign banks.