Russia To Write Off 90 Percent Of North Korea’s Debt
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Russia has agreed to “forgive” nearly all of a $11 billion Soviet-era debt owed to it by North Korea, reported the Financial Times, as part of a deal that will allow Moscow to enter into new projects in the North Korean energy, health and education sectors.
Russia has agreed to “forgive” nearly all of a $11 billion Soviet-era debt owed to it by North Korea, reported the Financial Times, as part of a deal that will allow Moscow to enter into new projects in the North Korean energy, health and education sectors.
The Russian finance ministry told state media on Tuesday that the agreement was in line with its policy of reducing the debt for its impoverished debtors; while the remaining sum owed by North Korea would be re-invested into the country and be repaid over the course of 20 years.
[quote]”The agreement marks the beginning of a new stage of development and financial relations between the Russian Federation and the Democratic People’s Republic of Korea,” wrote a finance ministry statement, as cited by the Wall Street Journal.[/quote]Related: To Russia With Love: Opportunities From Russia’s Accession To The WTO
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Slightly more than $10 billion of the debt will be written off immediately. According to WSJ, Russia has reached similar agreements over the years with many former Soviet-clients, due mostly in part because there is little chance that the loans would ever be repaid.
Still, Alexander Vorontsov, a North Korea expert at the Russian Academy of Sciences, noted to The Guardian, “this is an important serious step that will ease and expand the possibilities for further economic and trade co-operation.”
Vorontsov also said that the agreement with North Korea could facilitate the construction of a gas pipeline – bypassing the North – from Russia to South Korea.
[quote]“Nothing will happen immediately…. But undoubtedly, North Korea is very interested in the pipeline, said Vorontsov to Reuters.[/quote]Russian and North Korea resumed negotiations over the decades-old debt in August 2011, after a meeting between former Russian President Dmitry Medvedev and the late-North Korean leader Kim Jong Il.
Prior to the meeting, ties between the two former allies were strained after the collapse of the Soviet Union saw Russia subsequently insisting on hard currency payment for goods – a stance that contributed to North Korea’s precipitous economic decline in the 1990s, which culminated in an extended famine estimated to have resulted in more than 1m deaths.
After decades of being North Korea’s most important trade partner and benefactor, the end of the Soviet Union also saw Russia accounting for just $120 million of North Korea’s foreign trade last year, or 1.5 percent of the total.
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