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RUSSIA-AFRICA: Debt Write-Off Boosts Closer Trade Ties

Kester Kenn Klomegah

MOSCOW, Jun 5 2007 (IPS) - Long seen as funding the continent’s wars and doing little other than seeking out petroleum and mineral resources, Russia is now looking to kick-start better trade relations with Africa, and has made its first move by writing off the majority of the continent’s debt.

“We are helping our African partners reduce the burden of foreign debt. We have written off African debt totaling 11.3 billion dollars, of which 2.2 billion dollars is in the framework of the initiative to reduce the indebtedness of the poorest nations,” Russia’s foreign minister Sergey Lavrov said at a May 25 gathering of a group of ambassadors, diplomats and ministry officials marking Africa Day.

The move signaled Russia’s intention to fulfill its commitments made at recent Group of Eight (G8) meetings as well as paving the way to increased trade with the African continent.

“We are planning to increase the sum by half a billion dollars more this year,” Lavrov added.

An agreement was also signed into law Mar. 10 ratifying an agreement between Russia and African countries it aided during the Soviet era on trade, economic and financial relations as well as provisions on settling Africa’s debt to Russia, a Kremlin advisor told IPS on condition of anonymity. The aid was primarily through weapon deliveries.

“The most important aspect of economic cooperation in our foreign policy is to encourage African countries to trade with us and to not only depend on development aid. Always looking for aid makes these countries less productive and funds for projects end up in foreign banks at the expense of the suffering population,” he said.

Russia decided to write off about 750 million dollars in additional debt from Heavily Indebted Poor Countries (HIPC) owed by some 16 of the world’s poorest countries, of which the majority are in Africa. Benin, Tanzania and Zambia were included in the 16, and this year Russia is continuing discussions on a full debt write-off to HPIC countries in Africa on a bilateral level. African countries owed nearly 20 billion dollars.

Russia’s Finance Ministry, Foreign Ministry, Economic Development and Trade Ministry and Vnesheconombank will hold negotiations with the debtor countries which are expected to complete by the end of this year their participation in the IMF and World Bank’s HIPC Initiative.

“It’s an appreciative measure for Russia to liquidate all debts owed by African countries, including that of Tanzania, owed during the Soviet era. Russia’s debt relief plan under the auspices of G8 would understandably help stimulate our national economy and reduce the poverty burden of our people,” Patrick Chokala, Tanzania’s ambassador in Moscow, told IPS.

“For Africa, the 21st century should be seen as a turning period to promote trade with the industrialised world in order to develop our region, improve living standards and bridge the development gap,” he said.

Analysts also say Africa should consider trade as an important tool to transform and diversify its economy using its decades-old relationships with Russia.

“Of course, it will be nice for Russia to free most of these countries from debt, which were unfortunately mostly given during the Soviet Union to these countries to execute wars,” African economic analyst with Finland’s Sanoma magazine Dr. Bashiru Obasekola told IPS.

“In the first place, the loans did not directly benefit the economy, hence their multiplier effects are hard to ascertain. The monies that will be saved by the beneficiaries of these debt cancellations could be channeled towards development and exert positive effect on the economies of the continent, as trade and investments will be boosted amongst their neighbours,” he said.

He says Russia can help in the development efforts in Africa by way of direct investment and trade. Russia and Africa could open their markets to the other on mutually beneficial conditions.

“Africa does not necessarily need aid. What Africa needs is investment in her manufacturing sectors. Unfortunately, this is not happening quite enough, and most investments from Russia are concentrated in oil and mining sectors. For Africa to develop like the Asian countries, there should be more investment in manufacturing, energy and infrastructural sectors,” Obasekola said.

If Russia wanted to, it could easily supercede Chinese participation in Africa, he says. Most of the current political elites on the continent studied in the Soviet Union so all Russia needs to do is to show sincere and persistent interest. Russia could still use the specialists trained in USSR/Russia to build genuine friendship and promote trade cooperation with African countries, he says.

These efforts were given new impetus at the G8 summit in St Petersburg and will be continued this week in Germany.

“Russia’s cooperation with Africa has taken on a new dynamic in recent times. The level and intensity of contacts is increasing. We are carrying out ongoing work to expand and deepen our mutually beneficial cooperation in trade and the economy, science and technology, humanitarian and other areas,” President Vladimir Putin said in an official statement to the African Day gathering of diplomats.

“I am sure that the Russian-African partnership, which has stood the test of time, will continue to grow and develop. All the necessary conditions exist for us to achieve this goal,” he said.