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. Last Updated: 07/27/2016

Gref Urges Germany to Help Strike Debt Deal

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Economic Development and Trade Minister German Gref said Thursday it would be "impossible" for Russia to service its external debt when payments peak in 2003 and called on Germany to help hammer out a rescheduling deal with the Paris Club.

Gref told top German officials and businesses at a joint Russian-German economic forum in Moscow that Germany was the key to such a restructuring deal because it holds the largest share — 40 percent — of Russia's $48 billion debt to its largest creditor, the Paris Club. "There [will be] a serious problem surmounting the peak of payments in 2003," Gref said.

If no restructuring agreement with the Paris Club is reached, Russia will have to pay $3 billion in 2001, slightly more in 2002 and $6 billion in 2003.

As the largest single creditor, Gref said, other creditor nations and organizations would follow Germany's lead if it were to support a debt deal. Gref also called for more direct investment from Germany, which, at $6.4 billion from January through June, is also the largest investor in Russia.

Claus Mangold, board member of auto giant DaimlerChrysler, said that 600 German companies opened operations in Russia this year, bringing the total to 1,400.

Gref, insisting that the government was fully committed to implementing drastic reforms, said all these new investments would be protected.

Deutsche Bank board member Georg Krupp laid out the main reasons many investors are hesitating from coming to Russia: "A too-complicated tax system, very high taxes and the rights of owners, and creditors are not protected enough."

Gref said the government's new tax and customs systems, which will come into effect Jan. 1, will change the situation dramatically.

Judicial reform would begin to be tackled Monday with a decree by President Vladimir Putin establishing "a working group for reforming the judicial system," Gref said.

He said the top achievements of the year are a 7 percent rise in gross domestic product, higher state revenues and attacking "problems amassed over the last 10 years."

Another point of contention is the government's handling of production sharing agreements which enable foreign partners in oil and gas joint ventures to negotiate tax breaks with federal and regional governments in exchange for a share of the output.

Gref said that a bold new PSA program will be announced by his ministry before the end of the year that would pave the way for billions of dollars in new investments in oil and gas industry.

However, Peter Teumer, Moscow office head of German gas giant Wintershall, which has several deals with Gazprom, said that Russia does no t need PSAs. "PSAs are a transitional factor … that aren't needed in Russia," he said.

Teumer said PSAs are more appropriate for "countries like Malaysia, where there is no full confidence in the government."