Russia to cancel Cuba’s $29 billion of Soviet debt


18:08 GMT, Dec 11, 2013




Published time: December 10, 2013                            

The Cuban and Russian national flags (Reuters/Enrique De La Osa)

The Cuban and Russian national flags (Reuters/Enrique De La Osa)


Russia is going to write off 90 percent of Cuba’s $32 billion Soviet-era debt as part of a deal to end a 20-year dispute, according to diplomatic sources cited by Reuters.

  Prime Minister Dmitry Medvedev agreed to write off  the island’s debt during a visit to Havana in February 2013,  stressing details would be finalized by the end of the year.

  In October, the two sides signed a refinancing agreement that  requires Cuba to settle Moscow $3.2 billion over ten years, and  Russia would forgive the remaining $29 billion, which is $20  billion in debt plus service and interest, according to Reuters.  Between $5-6 billion of Cuba’s remaining foreign debt is  non-Soviet.

  The deal still needs to be agreed on by Russian lawmakers, and  there has been no comment from Cuban or Russian officials.

  Cash-strapped Cuba has been feverishly trying to restructure its  debt to jump start it’s economy and attract investment. Three  years ago it restructured $6 billion of its debt with China, and  in 2012 Japan forgave about $1.4 billion, Reuters reports.

  Mexico recently forgave $478 million of Cuban debt, and Havana  agreed to pay back $146 million over 10 years.

  In 2012 Cuba’s debt was estimated by government officials at  $13.6 billion. This debt is categorized as “active” foreign debt,  and the other debts before its default in the 1980s is considered  “passive”, according to Reuters.

  Cuba defaulted on its debt to the Paris Club- a group of the  world’s leading economies-Canada, France, Germany, Japan, Russia,  the UK and the US – in 1986. Cuba doesn’t belong to any  international lending organizations, like the International  Monetary Fund.

  Cuba’s total exports of goods and services is about $18 billion,  but its economy has been pinched by the 50-year trade embargo by  the US, which Cuban Foreign Minister Bruno Rodriguez has dubbed  as “barbaric genocide” against Cubans, who generally live in  poverty.

The Russian flag waves outside the Russian Embassy in Havana (Reuters/Claudia Daut)

The Russian flag waves outside the Russian Embassy in Havana (Reuters/Claudia Daut)


  Soviet ties

  After the fall of the Soviet Union, Russia became the legal  successor of Cuba’s loans, which have been rejected by Cuban  officials because they held in a currency that no longer exists,  to a country that no longer exists.

  Russia has maintained that Cuba owed the money since Soviet  times, while Cuba attests Russia should have compensated Cuba for  breaking their bilateral economic relationship back in the 1990s.

  Cuba remains a strong ally of Russia, with trade between the two  countries at about $200 million last year.

  Russian banks financing the debt forgiveness will be given a  government guarantee.

  Currently, Russian oil companies have a big interest in Cuba and  are pursuing offshore drilling.

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