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. Last Updated: 07/27/2016

Schroeder, Putin Face Talks on Debt, Security, Trophy Art

ST. PETERSBURG — German Chancellor Gerhard Schroeder and Russian President Vladimir Putin on Tuesday hailed the dynamic cooperation between their two countries but failed to reach a solution on Russia's long-standing debt that has impeded even closer ties.

Both leaders agreed to work on resolving debts the former Soviet Union owed the former East Germany, for which Russia is now responsible, as well as debts owed to Germany that Russia ran up after the Soviet Union fell apart.

The debt issue has become a primary obstacle for further economic development between Russia and Germany, which is its largest creditor and biggest trade partner. Both sides want a settlement, but the negotiations have been long and unsatisfactory so far to both sides.

Concerning the debt owed the former East Germany, Schroeder said, "We will find a solution that would avoid any kind of discrimination." The German leader went on to say that "As for the debt to the Paris club, we are ready to assist Russia if the situation changes relating to the debt."

Of Russia's $48 billion debt to the Paris Club of creditor nations, it owes Germany $19 billion. Russia initially balked at paying $3.5 billion in Paris Club debts coming due this year, but later yielded to pressure from creditor countries - including Germany - and started paying.

Germany believes that Russia, which has benefited from high oil prices, can now service its debt. But a large portion of that debt becomes due in 2003, and Russia has expressed concern that it may need help in restructuring what it owes.

Earlier, Schroeder told the Ekho Moskvy radio station that Germany was considering a proposal to write off some debts in exchange for equity in Russian companies but stressed that Russia was perfectly capable of paying off debts contracted after the collapse of the Soviet Union in 1991.

Upon arrival in Putin's hometown of St. Petersburg on Monday, the two leaders jointly paid tribute to victims of the 900-day Nazi blockade of the city then called Leningrad, which left more than 1 million Soviet citizens dead.

Speaking Monday at St. Petersburg University and in a Russian-German television interview, Schroeder and Putin stressed cooperation and Russia's aspirations for tighter ties with Europe - instead of the United States.

"Germany is one of the leading nations of Europe and Europe is our main partner," Putin said.

Putin's good German, honed during his years as a KGB agent in East Germany, has helped the two leaders establish a rapport. But Tuesday's talks promised to tackle some difficult issues.

A thorn in relations has been so-called "trophy art" seized by the Nazis and the Soviet army before and after World War II.

Schroeder's schedule Tuesday includes tours of the renowned Hermitage Museum and the imperial palace outside St. Petersburg that houses the famed Amber Room. The room was stripped of its amber-inlaid walls and royal furniture by the Nazis, and is being rebuilt with the help of German funds. The Hermitage also has disputed paintings in its collection.

Schroeder brought up Western leaders' concerns about media freedom in Russia on Monday. He told journalists he would discuss with Putin the showdown over NTV, Russia's only independent nationwide television network, which is in a takeover battle with its chief creditor and a major shareholder, state-connected Gazprom.

Putin argued that he supports media freedom but added that he considers the NTV case a business dispute that he wouldn't meddle in. He sternly warned outsiders against "pinching Russia" on the issue.

Schroeder has tried to assuage Russian suspicions about NATO's possible eastward expansion, and has questioned U.S. plans for a national missile shield, which Russia opposes. But Schroeder said in the television interview Monday that Germany wouldn't mediate between Moscow and Washington.