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. Last Updated: 07/27/2016

Germany to Help If Russia Hits 2003 Debt Crunch

ST. PETERSBURG — Chancellor Gerhard Schroeder said on Tuesday Germany, Russia's biggest foreign creditor, would help Russia restructure its huge foreign debt if it faced a repayment crunch in the next few years.

But there was little movement in finding ways for Russia to cancel some of its debts to Germany via investments in the Russian economy.

Russia's foreign debt payments, about $14 billion this year, will rise to $18 billion in 2003. This is seen by many Russian officials and analysts as an unbearable burden for stretched state coffers.

"If there are problems with (debt) repayments in 2003-2004, we are ready to help in considering debt restructuring," Schroeder told Ekho Moskvy radio through an interpreter.

At a later news conference in St Petersburg, President Vladimir Putin welcomed Schroeder's offer after what he called "open, substantive and productive" talks.

"We can thank our German partners for their readiness to discuss this matter with us, and support Russia if...the need arises in connection with a worsening economic situation."

Schroeder said Russia was currently repaying its debts, a move that would help it maintain creditworthiness.

"This is an indicator of the political and economic strength of Russia," he said, adding that the two sides may soon clinch a deal on repayment of money Moscow borrowed from old communist ally East Germany.

Russia wants to restructure its $40 billion or so Soviet-era debt to the Paris Club of creditor nations.

Some 40 percent of that total is owed to Germany, Moscow's main trade partner and creditor.

Russia wants to swap some debt for investment opportunities in the country's economy but one of Putin's foreign policy advisers said no one was ready to decide anything just yet.

"There are some difficulties on the German side and they are involved in corporate consultations," Sergei Prikhodko said.

Schroeder said on Ekho Moskvy radio that German business was interested in investment projects in Russia, especially in the energy and consumer goods sectors.

But Russian authorities must improve the investment climate, he added, removing bureaucratic barriers and providing guarantees for investors.

Russian officials have said eight joint projects aiming to convert Russia's debt into new German investments are in the pipeline, with four of them ready to go.