By IPS Correspondents
MOSCOW, Mar 1 2001 (IPS)

Environmentalists are urging Russia and its creditors to use a debt-for-nature swap scheme to help reduce the country’s 42 billion dollar debt to the Paris Club of creditor nations.

Under the scheme, creditors will write off parts of Russia’s debt in exchange for the Russian government’s funding of national environmental projects. The World Wildlife Fund (WWF), which has made the suggestion, believes that some nations would be willing to accept part of the debt in the form of cleaner air.

The WWF says that countries such as Bolivia, Bulgaria, Costa Rica, Ecuador and Mexico are using similar debt deals.

The environmental lobby group cites Poland as a success story. In 1991, Warsaw approached the Paris Club with a proposal to restructure its 18 billion dollar debt and spend 10 percent of it on environmental projects. As a result Poland amassed nearly half a billion dollars in environmental funds, which it has allocated to some 250 conservation projects.

The creditors may be more interested in the health and environmental benefits of a less polluted Russia than in cash payments, says WWF’s development director Irina Prokhorova.

Prokhorova and her colleagues at the WWF said the proposed scheme may lead to the write-off of only a tiny portion of what Russia owes to the Paris Club, however, it could still amount to between 10 and 100 million dollars in debt relief.

“It’s a small sum compared to Russia’s total debt, yet it could make a great difference in terms of the country’s environment protection measures,” Katya Pal, press officer with the WWF Russian Programme, told IPS.

Russia inherited billions of dollars of debt owed both by and to the former Soviet Union, when the Union collapsed in 1991. Russia’s total debt is about 150 billion dollars owed to Western governments and banks, to the World Bank and to the International Monetary Fund. The debt represents roughly 1,000 dollars per citizen. About two-thirds of that debt was incurred by the Soviet Union, and Moscow has vowed to repay it.

However, a debt-for-nature scheme could prove a hard sell. Paris Club countries have said they do not favour a debt write-off, though Germany, Russia’s largest creditor and the lead state for the western debt talks with Moscow, has shown a willingness to consider a long-term debt rescheduling deal.

German chancellor Gerhard Schröder has already proposed a debt-for- equity swap which would ease Russia’s debt burden and offer a chance for German businesses to step up their involvement in Russia’s resource-rich economy.

Russia is still thinking over the idea.

On a visit to Rome earlier this week, Russian Prime Minister Mikhail Kasyanov also suggested that his government could finance investment by Italian businessmen in Russia in exchange for the investor buying out part of the Soviet debt from the Italian treasury.

A debt-for-nature deal will prove just as advantageous to Russia as the debt-for-equity swap currently under discussion between Russia and Germany, according to WWF. By swapping debt for protection of the ecology, Russia will not lose its assets and will simultaneously solve environmental problems, WWF’s Pal told IPS.

The WWF Russian Programme argues that in a successful debt-for- nature scheme an international NGO, like itself, first has to get the rights to a portion of the debt from creditor nations. Then the NGO has to negotiate with the debtor government to receive compensation for the redeemed debt, with the condition that all funds it receives would go to environmental projects.

“The scheme is evidently beneficial for indebted nations such as Russia,” said Alexei Kokorin, a co-ordinator of WWF programmes in Russia. The funds are spent in Russia in national currency in the long-term, he said.

Moreover, the WWF argues that debt-for-nature schemes could eventually be used to relieve the debt burdens of other former Soviet states with poor environmental records – notably industrialised and polluted Ukraine, also a victim of the Chernobyl nuclear disaster.

The WWF had sent just such a proposal to Kasyanov two years ago, when he was deputy finance minister. The ministry at the time said that the government was not yet ready to discuss debt reduction ideas, Prokhorova said. Now she is hoping they will take another look at the WWF proposal.

Russia has a poor record of environmental protection. Its efforts in that area have been severely under-funded. For example, Russia has only one environmental protection inspectors for every 3,000 square kilometres, while in Luxembourg, for example, a staff of more than 300 inspectors cover a territory of less than 3,000 square kilometres.

The WWF is hoping a debt-for-nature swap will change that scenario.

Prokhorova says in any debt-for-nature swap protection of Russia’s forests should be the first priority. Russia’s forests represent nearly 22 percent of the world’s forest cover, an area larger than the continental United States. Most of these forests are conifers, called “taiga” in Russian.

The Russian Far East has the largest contiguous tiger habitat left on Earth, holding an estimated 430 tigers, an endangered species despite the efforts of anti-poaching patrols.

Prominent among other potential conservation projects is Lake Baikal in the Irkutsk region of eastern Siberia. It is the deepest lake on earth and contains some 20 percent of the world’s fresh water. It is also home to the incredibly rich bio-system stands one of the smallest of the world’s seals, the nerpa, the only species of seal in the world that lives exclusively in fresh water.

Yet another concern of conservationists is the fate of caviar- producing sturgeon in the Caspian Sea. The sturgeons are disappearing at an alarming rate, victims of over-fishing, poaching and pollution, according to the Russian State Fishing Committee.

The WWF knows that it faces an uphill battle to push a debt-for- nature scheme through Russia’s notoriously conservative bureaucracy. Already the finance ministry is denying any knowledge of the WWF initiative two years.

Finance Ministry spokesman Vladimir Shilov told IPS that the ministry, which is in charge of debt negotiations, knows nothing about the WWF initiative.

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