HAVANA (Reuters) – Russia and Cuba have quietly signed an agreement to write off 90 per cent of Cuba’s $32 billion debt to the defunct Soviet Union, a deal that ends a 20-year squabble and opens the way for more investment and trade, Russian and European diplomats said.
The two sides announc-ed an agreement to settle the debt dispute earlier this year and finalised the deal in Moscow in October. It would have Cuba pay $3.2 billion over 10 years in exchange for Russia forgiving the rest of a $32 billion debt – $20 billion plus service and interest, the diplomats said.
It must still be approved by the Duma, Russia’s lower house of parliament.
Negotiations on the form in which Cuba will pay the remaining debt are ongoing, the diplomats said, as even $320 million per year represents a large sum for the cash-strapped country, which has laboured under a US economic embargo for decades.
Cuba’s total export earnings are around $18 billion, including tourism and medical and educational services.
Neither Cuba nor Russia has made any official comment on the debt agreement. Cuban officials were not immediately available for comment.
Cuba defaulted on its debt in the late 1980s but recently has been trying to restructure the old debts to improve its international credibility.
Russian Prime Minister Dmitry Medvedev, during a visit to Cuba in February, signed a general agreement to work out a formula and settle the old debt by next year. The decision rankled other countries grouped in the Paris Club of creditor nations because it broke ranks with the collective approach of the organisation.
The Paris Club is an informal group of creditor governments including Canada, France, Germany, Japan, Russia, the United Kingdom and the United States as well as a number of smaller European nations.
The Paris Club reported that Cuba owed its members $35 billion at the close of 2012, now estimated at around $37 billion, which would leave the island owing $5 billion to $6 billion of non-Soviet debt to the club’s members.