Paris club of creditors and its members. Russia's interaction with the Paris and London clubs. Features of the activities of the Paris and London clubs of creditors

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:43

The Paris and London clubs of creditors are informal informal international associations. They include a different number of participants, and the degree of their influence is also different. The Paris and London Clubs were formed to restructure the debts of developing countries. Let us consider further how the relations of the Russian Federation with these associations proceeded.

Features of the Paris and London Club of Creditors

These associations have special procedures for reviewing and restructuring debts. Differences are also present in the internal structure of organizations. The London Club is essentially a forum for rescheduling loans made by commercial banking institutions that are not guaranteed by the government of the lender. The association does not have a permanent chairman and secretariat. Procedures, as well as the organization of the forum itself, are characterized by a free character. paris clubcreditors was formed in 1956. It has 19 members. Unlike the London Club, the Paris Club reviews debts to official creditors. If there is an immediate threat of non-payment of the loan, the government of the debtor turns to the public authorities of France. A formal request is sent to negotiate with the lender.

Negotiations

The Paris Club organizes direct communication between the debtor country and the state that provided the loan. The first is represented by the Minister of Finance or the Chairman of the Central Bank. Officials from the Ministry of Finance, the Ministry of Foreign Affairs or the Ministry of Economy are present at the negotiations on behalf of the creditor. Observers are also present. They are representatives of the IBRD, IMF, UNCTAD and regional banking structures. In the process of negotiations, a set of recommendations is developed. The agreed conditions are recorded in the minutes. This document is legally advisory only. It contains a proposal to representatives of countries between which a financial dispute has arisen to negotiate and sign bilateral agreements on revising the terms of repayment of obligations. Despite the fact that the content is in the nature of a recommendation, the provisions of the protocol are binding on the parties that have accepted it. In accordance with it, agreements are concluded, which, in turn, have legal force. Decision-making, establishment of conditions is carried out according to the principle of reaching consensus. I.ethe result of the negotiations should suit both parties.

Restructuring the debt of the Soviet Union

It should be noted that relations with the London Club after the demise of the USSR were accompanied by a number of problems. The Soviet Union is considered the largest debtor of all countries. In 1991, the first problems arose. Then Moscow refused to pay interest on the USSR loan. Within the framework of the London Club, a special council was convened. It included 13 commercial banking structures, to which the Russian Federation had a debt. The main task was to settle the obligations of the former USSR. In general, the question is quite simple. However, it turned out to be quite difficult to solve it. Until the autumn of 1997 regular council meetings were held. Once every three months, decisions were made to defer payments and interest for another 3 months. The position of the BPC (Council) was quite tough from the very beginning. It was assumed that Moscow, even with a delay, should pay everything. This position was clearly articulated as early as 1993. It must be said that up to this point in Moscow there was no clear idea of the actual size of the obligations of the USSR. It was assumed that the total debt is 80-120 billion dollars. Considering that the volume of the gold and foreign exchange fund was about 5 billion dollars, it is clear that the payment was almost impossible.

Start settlement

The first steps were taken by A. Shokhin in 1994. At that time he was a vice-premier in the government. Shokhin was able to agree with Fontz (the head of the BPC) on a 5-year deferral of interestand payment of the debt in 10 years. But this measure was seen as temporary. It was supposed to be followed by a radical re-registration of the main share of liabilities and accrued interest in government bonds of the Russian Federation. The next step was taken in 1995 by the new Deputy Prime Minister V. Panskov. He agreed to restructuring for 25 years. After that, Moscow had a choice. She could insist on writing off the main part of the debt or go for further restructuring. The first option, of course, looked the most preferable. But its adoption was practically impossible due to the tough position of the German banks. They accounted for about 53% of the debt. After some hesitation, it was decided to go for further restructuring.

Debit nuances

First of all, this opportunity is provided only once. In this case, the balance of the debtor must be repaid according to a fairly rigid schedule. In addition, the status of the new securities, into which the debts are re-registered, corresponds to Eurobonds. In case of any delay on them, a cross-default is declared. This, accordingly, entails a sharp downgrade of the state's rating and its isolation in international financial markets.

Further developments

In August 2009, the government approved the initiative of the Ministry of Finance to settle the external debt of the USSR. It was assumed that about 34 million dollars would be paid. At the same time, 9 million creditors did not declare their claims for debt settlement. Further negotiations with them were not planned. ATAs a result of the steps taken, the Ministry of Finance managed to complete the payment of commercial debt by exchanging $405.8 million for Eurobonds maturing in 2010 and 2030. At the same time, the total number of claims, according to a press release from the Ministry, exceeded 1900.

Paris Club of Creditors and Russia

After the collapse of the USSR, it was assumed that the newly formed states would bear their part of the responsibility for the existing external debt. At that time, it amounted to 90 billion dollars. Together with the debt, each state was also en titled to a corresponding share in the assets. However, in practice it turned out that only Russia could fulfill its obligations. In this regard, by mutual agreement, it was decided that the Russian Federation assumes all the debts of the republics in exchange for their renunciation of their due shares in assets. It was a rather difficult decision, but it allowed the country to maintain its position in world markets and helped to strengthen the confidence of potential foreign investors.

Stages of negotiations

The Paris Club and Russia negotiated in several stages. They began immediately after the official announcement of the demise of the USSR. The first stage dates back to 1992. Within its framework, the Paris Club of creditors provided short-term three-month deferrals for the repayment of external debt. This stage also includes obtaining a loan from the IMF for 1 billion dollars. The second stage took place from 1993 to 1995. The Paris Club agreed on the signing of the first restructuring agreements with the Russian Federation. Under these agreements, the country accepteditself all the obligations of the USSR, the maturity of which fell on the period from December 1991 to January 1995. The third stage began in April 1996. The Russian Federation and the Paris Club of creditors supplemented their agreements with a comprehensive agreement. In accordance with it, the total debt was about $ 38 billion. At the same time, 15% of them were supposed to be repaid over the next 25 years, until 2020, and 55%, which included short-term debt, over 21 years. The restructured debt had to be paid in cumulative amounts since 2002.

Memorandum

It was signed on September 17, 1997. The Paris Club and Russia signed a Memorandum of Understanding. He formalized the country's accession to the association as a full member. From the moment the document was signed, debt claims from Russia have the same status as those of other countries.

Protocol

On June 30, 2006, early repayment of the debt was announced. At the time of signing the corresponding protocol, the amount of liabilities amounted to 21.6 billion dollars. This debt was restructured in 1996 and 1999. Until 2006, the Russian Federation served and repaid obligations. The protocol provided for the payment of part of the debt at par, and part - at market value. For the latter, obligations were redeemed that had a fixed rate. Loans of this type have been provided by members of the Paris Club such as the Netherlands, Great Britain, France and Germany. The early redemption premium for these countries amounted to nearly $1 billion. US debt was carried out at par, although America also provided a loan at a fixed rate.

Last payouts

After the agreements, A. Kudrin announced that Vnesheconombank would close the debt by 21 August. It was on this date that the Paris Club received interest payments from the Russian Federation. The head of the Ministry of Finance kept his promise. In the middle of the day on August 21, information appeared on the official page of the bank that the last transfers to the accounts of lenders had been made. Thus, planned payments amounted to 1.27 billion dollars, 22.47 billion were allocated as early payment. Australia was one of the first countries whose accounts were replenished. Mark Vale (Deputy Prime Minister) said then that early repayment indicates a strengthening of the Russian economy and acts as a key element of bilateral relations. Prior to the signing of the June agreements, the Russian Federation was considered the largest debtor.

The Paris Club since the collapse of the USSR has focused its work on reaching agreements with Moscow. After paying off all the debt, many experts began to talk about the expediency of the further functioning of this association. In addition to the Russian Federation, countries such as Peru and Algeria repay their obligations ahead of schedule. Some time ago, the Paris Club did not assume that these states would be able not only to pay their debts, but to do it ahead of schedule. Vnesheconombank's payments were made in nine currencies. To transfer funds, the Ministry of Finance previously exchanged 600 billion rubles in euros and dollars. The main payments werein these currencies. After the full repayment of debts, Russia became a full member of the Paris Club.

Results

Despite the problems that accompanied the interaction of Russia with the Paris and London clubs, the Russian Federation still managed to get rid of the previous debts. From the very beginning of their existence, these associations act as the most important link between countries that provide and accept monetary obligations. They seek to lighten the burden of states on the direct servicing of their debts. At the same time, their goal is to maintain the solvency of the borrower in the long term. The Russian Federation strives to take a comprehensive approach to solving the problems of international debt, taking into account the interests of all parties. The debt crisis that arose in the 1990s was the result of an unfavorable combination of subjective and objective circumstances. Nevertheless, the Russian Federation managed to show its viability and ability not only to accept, but also to fulfill international obligations. Early payments not only helped to avoid debts and delayed payments, but also ensured Russia's full participation in the Paris Club.

Conclusion

Currently credit rating is extremely important for any country. Given the difficult economic situation in the world, it is necessary to clearly understand your needs and opportunities. It should be said that the formation of public debt is determined by the budget deficit. And he, in turn, is the sum of unclosed holesin the budget for the entire period of existence of the country. External debt - obligations to individuals and organizations of other states. It necessitates the existence of such informal associations as the London and Paris clubs.