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. Last Updated: 07/27/2016

Zadornov Says Wipe At Least Half of Debt

Former Finance Minister Mikhail Zadornov said Russia would not be able to service its Soviet-era foreign debt without a 50-percent write-off, more than the government was asking for in London Club debt talks Tuesday.

Zadornov said he was worried by Finance Minister Mikhail Kasyanov's Monday comments that Russia wanted London Club commercial creditors, who are owed $32 billion, to forgive 40 percent of outstanding debt.

"No less than 50 percent must be written off. If that does not happen with the London Club, if that does not happen with the Paris Club, which will be next year, then we probably will not be able to service the debt again, even the restructured one," he told NTV television.

Russia owes the bulk of $100 billion in Soviet-era debt to the London Club and to the Paris Club of state creditors, who rescheduled most payments due from Russia until the end of next year in anticipation of a larger 2000 restructuring.

Russia also owes some $50 billion borrowed by the Russian Federation since 1992, which the government has vowed to repay and service in full as it attempts to restructure Soviet debt.

"In the last year, the Finance Ministry and Economics Ministry made detailed calculations," Zadornov said.

"And from these calculations it is clear that Russia, in the medium term, is able to service foreign debt only if at least 50 percent - and preferably 70 percent - of the former Soviet debt is written off through talks, and, of course, if Russia takes certain responsibilities - structural reform, a balanced budget, increased budget revenues."

He said it would be better for Russia to achieve a two-year rescheduling, similar to the Paris Club deal, rather than agree to a quick total debt restructuring with an unacceptable write-off.

Kasyanov has said Russia could manage foreign-currency denominated debt service of no more than $12 billion per year for the next three years and $14 billion over the following seven.

Meanwhile, Itar-Tass reported from Frankfurt on Tuesday that Kasyanov had said he was optimistic there could be progress in talks with the London Club of commercial creditors.

"I have not seen creditors for two months. A lot has changed in that time," Itar-Tass quoted him as saying before the sixth round of negotiations on restructuring $32 billion of Soviet-era debt.

He said the Russian government "fully controlled the country's economic situation" and the macroeconomic situation met a program agreed to with the International Monetary Fund.

On Monday, he had said Russia was considering meeting creditors' main demand: raising the defaulted debt, PRIN and IAN bonds, to Eurobond status.