North Korea says signed debt deal with Russia

Reuters News
Posted: Sep 18, 2012 12:33 AM
North Korea says signed debt deal with Russia

SEOUL (Reuters) - North Korea's state news agency KCNA said on Tuesday that it and Russia had signed a deal on debts owed by Pyongyang to Moscow, although it gave no details of any of the terms.

North Korea is estimated to owe about $11 billion, racked up when it was a client state of the Soviet Union. The two countries held talks on a debt settlement earlier this year, according to media reports.

"A contract was signed in Moscow on readjusting debt that the DPRK (North Korea) owed to the Russian Federation as a result of the loans that the former Soviet Union had offered to the DPRK," the KCNA reported on Tuesday, saying that the deal had been signed in Moscow on September 17.

Russian newspaper Izvestia reported in 2011 that Russia would write off 90 percent of its debt, a level that is generally given to the poorest countries in the world that seek debt restructurings.

In return, Russia would be able to invest in North Korean projects in the energy, health and education sectors, a Russian official said this year.

Russia has indicated that it wants to build a gas pipeline to energy-hungry South Korea via the North, although the multi-billion dollar project is unlikely to get off the ground as North and South Korea remain technically at war and are separated by one of the world's most militarized frontiers.

North Korea traditionally played off China, its main economic and political backer, against the former Soviet Union until its collapse in 1991.

Russia has recently sought to boost its influence in Asia's fast growing economies.

(Writing by David Chance; Editing by Ron Popeski and Robert Birsel)