Russia agreed Thursday to write off $4.5 billion of Libya's Cold War-era debt in return for military and civilian contracts between the north African country and Russian companies, officials said.
The deal was one of 10 trade, investment and political agreements reached during a visit by President Vladimir Putin of Russia, the first by a Kremlin leader to the OPEC member since 1985.
"I am satisfied by the way we have solved the debt problem," Putin said. "I am convinced we found a scheme which will benefit both the Russian and Libyan economies and the Russian and Libyan people. The deal will not only employ
Russian defense enterprises but will also help strengthen Libya's defenses."
Libya, whose oil and natural gas industries earned more than $40 billion in 2007, is being wooed by Western companies seeking contracts for involvement in big state infrastructure projects.
The Russian finance minister, Alexei Kudrin, said that the debt would be cancelled once payments for the new contracts arrived in the bank accounts of Russian companies.
Analysts say the debt was built up during the Cold War, much of it as a result of Soviet arms supplies to Libya.
The largest single commercial deal signed during Putin's trip was a €2.2 billion, or $3.48 billion, contract for state-controlled Russian Railways to build a stretch of line between the cities of Sirte to Benghazi. Putin said the railroad deal would help Libya solve its infrastructure problems.
The Interfax news agency of Russia said Monday that Moscow hoped to sell anti-aircraft systems, jet fighters, helicopters and warships worth €2.5 billion to Libya. The two countries also signed agreements on investor protection and the handling of confidential information. Russia, the traditional weapons supplier to Libya, is seeking to revive its role as a global power, which diminished after the Soviet Union collapsed.
It also wants to deepen energy ties with Libya, conscious that Western and Asian companies have snapped up the bulk of oil and natural gas ventures in the country in recent years.
Libya's ties to the West have warmed since it abandoned its weapons of mass destruction programs in 2003, prompting the removal of most international sanctions.
(International Herald Tribune, 04/18/2008)