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. Last Updated: 07/27/2016

Germany Not Halting Russian Export Credits

BERLIN, Germany - Germany has decided not to suspend export credit guarantees to Russia for the time being following delays in Moscow's servicing of its Paris Club sovereign debts, the Economics Ministry said Friday.

"No suspension of cover has been decided," a ministry spokeswoman told Reuters following a meeting on Thursday of officials from the finance and economics Ministries, the Hermes export credit guarantee agency and the private sector.

"Two further business guarantees were decided yesterday," the spokeswoman added, but declined to name the firms involved.

"Russia's behaviour will continue to be observed."

Moscow has said it will only meet only part of its payments obligations on its $48 billion Paris Club debt in the first quarter of this year. Russia owes two-fifths of that debt to Germany, its largest foreign creditor.

German officials had suggested the panel of officials which met in Berlin on Thursday could decide to suspend new export cover after delays in debt payments. The interdepartmental working group meets every three weeks to review new requests for guarantees to cover investments in and exports to Russia.

Withdrawal of export credit guarantees is one of the few means the German government has to put pressure on Russia. A withdrawal would mean that German businesses would have no security if their Russian partners did not pay up.

Germany only resumed export cover to Moscow last July, opening up a one billion mark ($480 million) facility after disputes on earlier guarantees were resolved. Credit guarantees had been withdrawn in September 1998 after Russia missed heavy debt service payments to the Paris Club.

Germany has been angered by a Russia's decision, approved by cabinet on Tuesday, to skip $1.5 billion in Paris Club debt service payments in the first quarter of this year. The creditor group has said it would not condone any unilateral default.

That came despite an assurance from Russian President Vladimir Putin last weekend during a visit by Chancellor Gerhard Schroeder that Moscow would pay all the money it owes, but needed time to do so.

Moscow is widely seen as adopting a tough negotiating stance ahead of talks on a reform package at the end of this month with the International Monetary Fund which could open the door to a new restructuring deal on the Paris Club debt, which Russia inherited after the collapse of the Soviet Union in 1991.

Western lenders have said Russia's oil-driven economy is in good enough shape to fund debt payments, and only a sharp downturn on world oil markets would justify some kind of rescheduling deal -- but no debt forgiveness.