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. Last Updated: 07/27/2016

Russia and Germany Open Debt Talks in Moscow

Russian and German negotiators were to meet in Moscow on Monday to discuss the terms for Russia's repayment of its Soviet-era debt to Germany, including a controversial plan to trade debt for equity in Russian businesses.

Earlier this month, German Chancellor Gerhard Schroeder said that his country would be willing to swap part of its $19 billion share of Russia's foreign debt for shares in Russian companies. Russian Prime Minister Mikhail Kasyanov responded positively, but other officials expressed concern that chunks of Russia's most valuable companies could end up in foreign hands.

Kasyanov said that Germany could get stakes in newly established, small enterprises in the processing industry, Interfax reported. Citing an unidentified official close to the talks, Interfax said that the government would not give up stakes in major Russian enterprises.

The two-day talks this week were to be led by German Gref, Russia's economic and trade minister, and Germany's Finance Ministry State Secretary Caio Koch-Weser and Economy Ministry State Secretary Axel Gerlach.

The huge foreign debt is a substantial concern for the government as it tries to solidify Russia's tentative recovery from the financial crisis of 1998. The $148 billion foreign debt is equal to 60 percent of the nation's gross domestic product.

Some $48 billion of that sum is in Soviet-era debt that Russia inherited after the 1991 Soviet collapse. Russia's hopes for winning a partial write-off were dashed when the government failed to come to an agreement with the International Monetary Fund to resume lending - a sign that international lenders remain doubtful Russia's intention to hammer through economic reforms.

Russia is due to pay the Paris Club more than $3 billion next year.