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. Last Updated: 07/27/2016

Energy Minister Outlines Debt Plan

Crippled by chronic nonpayment problems among industrial energy users and producers, the Russian fuel and energy sector has set up a financial scheme in a bid to offset growing mutual debts.

Anatoly Kozyrev, first deputy fuel and energy minister, said Thursday the sector was making enough profit to finance its own investment programs, but failed when it came to collecting debts.

"We don't need anything from the state. The only problem today is to make our intercompany payments scheme works," Kozyrev said.

The new scheme would allow companies to convert their debts to bills of exchange that could be traded within the industry and used to make payments to banks, said Boris Kozeikin, director of the Financial Energy Union, a nonprofit organization that will oversee the project.

The bills will be issued to enterprises under general lien conditions, but cannot be used to pay federal taxes, Kozeikin said, adding that the overall issue of bills could amount to about 18 trillion rubles ($3.6 billion) within two years.

Kozeikin said payments through the scheme, if it is implemented, could reach 50 trillion to 80 trillion rubles annually. He said Mosbusinessbank, Inkombank, Menatep, Tveruniversalbank, Unexim Bank and Toribank are potential participants in the scheme.

Industrial energy users owed about 153 trillion rubles to the fuel and energy industry for the first five months of this year, while its own payable debt amounted to 83 trillion rubles, Kozyrev said.

"If consumers made their payments in time, we wouldn't have this problem with tax arrears to the government," the minister said, adding that overdue payments to the federal budget in the industry reached 18 trillion rubles.

He said, however, the scheme is unlikely to come into effect "until after the [presidential] election," which is set for July 3.

The fuel and energy sector accounts for about 34 percent of budget revenue this year, and some 40 percent of Russia's export income, Kozyrev said.