G7 Meeting in Munich: Yeltsin hopes for wave of foreign cash
Thursday 09 July 1992
Both Mr Yeltsin and Helmut Kohl, the German Chancellor who hosted the Munich summit, confirmed that debt relief was in prospect. The Russian President indicated he expected a 'powerful wave' of private foreign investment now that his country had reached agreement on economic reforms with the International Monetary Fund, which will soon release a dollars 1bn (pounds 529m) loan to Moscow.
Seeking to reassure the international community at the end of the summit, Mr Yeltsin said fears of a Communist-inspired coup in Russia were baseless, and he predicted that, by the end of his presidency in 1994, the reforms would be irreversible.
Mr Yeltsin, who held talks with the seven leaders after the summit yesterday, was vague on the details of his request for a foreign debt moratorium. But G7 officials believe he wants a suspension of interest and debt principal payments on the former Soviet Union's dollars 70bn of foreign debt for up to two years. A decision will be taken by the Paris Club of Western creditor governments and the G7's positive attitude is bound to influence the outcome.
Mr Yeltsin said the partial agreement with the IMF on a first phase of economic reforms meant 'the gates are now open wide. We can now expect a powerful flow (of foreign investment) in the Russian market - there is no such market in the world.'
He talked of foreign investment of the order of dollars 100bn, dwarfing the official planned assistance programme of dollars 24bn. But the G7 believes most investment will be in energy. Its request that Russia's energy prices be allowed to float to world levels and the energy sector opened up to foreign investment indicated that the West was not sure the conditions were right for large-scale foreign investment.
President Bush warned: 'I don't know that there's enough money in the world to instantly solve the problems of the Russian economy.'
Mr Yeltsin nevertheless asked the Seven to provide insurance for foreign investors in Russia against political risk. He added that new decrees in Russia would offer foreign investors the guarantees they have asked for. John Major said Britain would free dollars 500m of previously frozen export credit guarantees for goods to Russia.
Mr Kohl revealed that the G7 had established yet another institution: a consultative group of the G7, Russia and institutions such as the IMF which would meet periodically to identify problems affecting the free-market reforms.
Mr Yeltsin informed the summit that Russia's situation, and therefore the pace of the reforms, was unique, but the G7 told the Russian President that 'substantial sacrifices' would be needed if the economic transition were to succeed. One of those was land reform, which should in theory boost farm output and reduce expensive imports. Mr Yeltsin played down the costs of failed reforms, and warned that if they did not work, 'the repercussions would be felt around the world'.
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