Posted on 01/13/2005 8:37:34 PM PST by jb6
LONDON -- Nearly six years ago, the world's rich nations were busy bailing out Russia from the throes of a deep financial crisis.
In an ironic turn of events, it is now the turn of less prosperous countries like Russia and Poland to lend a helping hand by repaying debts to rich countries like Germany and France, which are grappling with budget deficits.
The Paris Club of creditor nations met Thursday to discuss plans by Russia and Poland to buy back $46.1 billion and $16.3 billion of debt respectively.
Germany, which has breached the 3 percent European Union budget deficit ceiling for three years in a row, has welcomed the moves to repay debt early. Analysts said the creditors' budget needs had fuelled the drive for debt repayment.
"It is partly motivated by the need of specific creditors for financing their budget deficits that privatization revenues in those countries have been unable to deliver," said Alex Garrard, emerging market strategist at UBS.
Germany sold 5 billion euros' worth of Russian linked credit notes to private investors last year in a bid to plug a hole in its budget.
Poland had old trade debts to Germany of just over 2 billion euros at the end of 2003, while Russia owes about $20 billion to Berlin. German government sources have said Moscow could repay Berlin as much as $5 billion to $6 billion in 2005.
While the amounts to be repaid may be small compared to market borrowings planned by Germany or France this year, analysts said additional inflows would always be welcome for governments struggling with bloated expenditure.
Garrard said different factors motivated Russia and Poland to pay down their Paris Club debt.
Poland has said from the beginning that it wants to smoothen the redemption profile of its foreign debt, making fiscal policy easier in the run-up to and after its planned eurozone entry.
"Poland is the last country within the European Union owing money to the Paris Club. A repayment will make its external debt market more liquid," said Christian Schiweck, director of emerging markets fixed income at DWS Investments in Frankfurt.
But unlike Russia, Poland does not have massive foreign exchange and fiscal reserves to pay back its debt and has opted instead to sell eurobonds.
On the other hand, high crude oil prices have helped Russia to pile up massive foreign exchange reserves and add billions of dollars to a rainy-day budget stabilization fund. Moscow has said the cash for debt repayments will come from this fund.
Russia's gold and foreign exchange reserves stand at $124.6 billion, the largest outside Asia, and the stabilization fund is forecast to exceed $20 billion.
The Cabinet on Thursday approved Finance Minister Alexei Kudrin's 2005 borrowing strategy, which foresees net debt issuance of 125 billion rubles ($4.5 billion).
New borrowing will rise from last year's 96 billion rubles as Russia, which runs a budget surplus, seeks to boost liquidity on its domestic debt market.
"We are continuing to build up our domestic debt," Interfax quoted Kudrin as telling ministers during the meeting.
Total debt issuance is planned at 211 billion rubles and debt retirement at 86 billion rubles, leaving net issuance at 125 billion rubles.
And we care?? Only Russia cares!
I don't really see the irony--money was funneled to Russia to keep her afloat, not it's paying back, so to speak, the investment. No irony there. (Irony in this case would be if France and Germany were paying that money in order to keep Russia down.)
Which explains why he stole the oil back from the private companies. The first stage of the return to a Oligarchy.
Um, Khodorkovsky was an oligarch, one made by Clinton's advisors. Besides, Khodorkovsky was planning on selling off two of the biggest oil fields in Russia to foreign companies and the government said no. He told them to shove it and they shoved back.
The irony is: Germany's economic wealth was built by good capitalists while Russia's was wasted away by Communists. Things have reversed and now it is Germany who is cash strapped and desperate.
I get the point but it isn't ironic.
When Reagan decontrolled oil pricing it was all over for the Soviet Union.
Where are the haters today?
"who has stolen the oil" Khodorkovsky and his ilk? Do not worry, now the sheriff came back to the town.
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