ECONOMY

Serbia and Russia reach deal to settle communist-era mutual debts

BELGRADE (Reuters) – Serbia said yesterday it had agreed to a detailed plan on fully settling mutual communist-era debts with Russia, paving the way for a greater role by Russia’s Gazprom in Serbia’s gas sector. Last November, Serbia and Russia reached a framework pact on how to settle a variety of mutual debts, in a bid to untangle a decades-old debt backlog. But the deal never got a go-ahead from the authorities in Moscow. Finance Minister Mladjan Dinkic, in Moscow for talks, told Reuters in a telephone interview the deal would help Serbia settle a $243-million debt piled up for gas during the rule of Slobodan Milosevic and fully collect claims against Russia of $288.8 million communist-era trade debts. The outstanding debt, on the Russian side, will be repaid through Russian works to revamp the Djerdap hydroelectric power plant on the Serbian border with Romania and build an accelerator unit in the Belgrade Institute of Nuclear Science Vinca. The agreement was expected to be formally approved by the governments of Serbia and Russia in September, Dinkic said. Outlining a complex debt settlement plan, Dinkic said a big chunk of Serbia’s debt to the Russian gas giant Gazprom would be settled under this agreement. «We agreed to directly settle $188.3 million of our total gas debt to Gazprom through this deal. The remaining $55 million will be repaid over eight years, at LIBOR, but Gazprom will not keep the money for itself. It will invest it back in Serbia’s gas sector through a new joint company,» Dinkic said. Gazprom, together with Serbia’s oil monopoly NIS, will set up a 50-50 joint venture company to develop a gas reservoir and a gas distribution network in Serbia. «The value of the gas reservoir in Banatski Dvor is estimated at some $240 million, and Gazprom and NIS will be financing half of the value each,» Dinkic said. The new Gazprom-NIS joint company will also invest in a gas network in southern Serbia, between Nis and Dimitrovgrad, on the Bulgarian border, Nis and Leskovac and between Leskovac and Pristina, the capital of the UN-administered province of Kosovo. «Of course, the agreement with Russia will save us a lot of hard currency cash, but this does not mean debt forgiveness to ultimate debtor – NIS… We will soon sign an agreement with NIS, setting out their debt repayment schedule,» Dinkic said.