Russian-Cuba debt deal creates waves among creditors

Thu Mar 14, 2013 11:02am EDT
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* Deal brokered behind Paris Club's back

* Japanese accord with Cuba could be model

* Russia not first to break with Paris Club

By Marc Frank

HAVANA, March 14 (Reuters) - Russia's agreement to settle a debt squabble with Cuba over $25 billion owed the former Soviet Union has caused concern among other Cuban creditors grouped in the Paris Club, Western diplomats said this week.

The accord, signed late last month during a visit by Russian Federation Prime Minister Dmitry Medvedev, said the parties had come up with a formula to end the dispute and would sign final papers by 2014, although any deal still needs approval from the Duma.

Cuba last reported its foreign debt in 2009 as $19.8 billion. About 50 percent of that was "passive" debt from before it declared a default in the late 1980s, while the rest was accumulated afterward and classified as "active."

The Communist-run island has never included debt to the Soviet Union in its figures, claiming the amount is in overvalued convertible rubles and that the country sustained massive damage from broken contracts when its former benefactor collapsed.

While little information is available about the deal with Russia, Cuba has let other creditors know it is in no condition to pay its old debts, much of which now consists of accumulated service and interest charges.   Continued...