UNITED States senators are sharpening their focus on the
ex-Soviet republics' debts as they examine President Bush's
proposal to help fund the $24 billion international aid package for
the beleaguered new states.
The lawmakers are concerned that the republics' heavy burden to
repay foreign governments, suppliers, and especially commercial
banks will absorb international funds intended to shore up economic
reforms. They worry that the cash crisis will prolong the former
republics' reliance on military exports for hard-currency earnings.
The $24 billion aid package "will be wasted unless there is a
simultaneous resolution of the debt problem," says Karin Lissakers,
director of international and banking studies at Columbia
University's School of International and Public Affairs. She says
that Russian representatives submitted documentation to commercial
creditors in March that their debt burden is $2 billion a month.
Other banking sources say the number is grossly inflated. Whatever
the amount, Ms. Lissakers's concerns are shared by Democrats and
Republicans on Capitol Hill.
The "top economic priority" of the former republics "should be
to ... modernize the economy and to halt the plunge in living
standards that is stirring social unrest and undermining popular
support for democratic reforms," says Lissakers. But the republics
are "under heavy pressure from the West" to meet debt payments in
order to keep credit lines open. "The desperate payment situation
... has had a chilling effect on foreign investment and on the new
private sector," she says.
US Sen. Bill Bradley (D) of New Jersey, chairman of the Senate
Finance Subcommittee on Deficits, Debt Management, and
International Debt, supports the $24 billion package, but only
after the former Soviets are substantially relieved of their debt
obligations. "The infusion of fresh capital cannot be allowed to be
recycled to international bankers," he says.
The breakdown of the $65.3 billion debt, a difficult task given
poor Soviet records, has been laboriously documented by the
Advisory Committee of Banks for the Management of Commercial Debt
for the Former Soviet Union. Foreign governments hold $22 billion;
commercial banks - led by Germany, then Italy, Japan, France, and
Austria - hold $24 billion. US banks have minimal exposure. Foreign
suppliers, such as trading houses, hold up to $4.5 billion; the
rest is a mixture of bonds, letters of credit, and other short-term
Roger Robinson, a former Chase Manhattan banker who is now a
private consultant, contends that German sovereign and commercial
lenders, by far the largest national group of creditors, should
reschedule some debts over the long term and forgive others. German
refusal to offer debt relief would turn the $24 billion aid package
into a debt-service fund, he says. …