Russia writes off $32B of Cuba’s Soviet-era debt

Bloomberg NewsJuly 11, 2014 

— Russia agreed to write off 90 percent, or almost $32 billion, of Cuba’s Soviet-era debt as President Vladimir Putin on Friday arrived on the Caribbean island for meetings with President Raul Castro and his brother Fidel.

The agreement was signed into law by Putin hours before he landed in Cuba, 90 miles (145 kilometers) from Florida. The accord was passed by the lower house of parliament on July 4 and approved by the upper chamber two days ago. In 2010, Cuba and North Korea together accounted for more than half of all foreign assets claimed by the Russian government.

With Russia mired in a standoff over Ukraine, Putin is kicking off a six-day tour of Latin America by offering joint ventures and throwing a lifeline to former Cold War ally Cuba, where economic growth has ground to a halt. In March, Cuba became one of 11 countries in the 193-member United Nations General Assembly to reject a U.S.-backed resolution declaring invalid Crimea’s referendum to secede from Ukraine.

“Cuba is one of Russia’s leading partners in the region” with which “we closely coordinate our foreign policy,” Putin said in an interview with Itar-Tass and Prensa Latina Thursday. While “our bilateral trade has slowed somewhat in the 1990s,” Russia is “ready to make up this lost ground.”

Russia has been accused by Ukraine of stoking a three-month rebellion by pro-Moscow rebels in the east of the country after its annexation of Crimea in March. Fellow ex-Soviet republics Ukraine, Moldova and Georgia signed association agreements with the European Union last month, choosing closer ties with the 28- nation bloc in the face of possible economic measures from Russia.

Putin will also visit Argentina and Brazil in the coming days. His trip is the second by a high-profile Russian official after Prime Minister Dmitry Medvedev was in Cuba last year.

Having outlasted 10 U.S. presidents so far, the Castros are approaching their 90s. Raul Castro, 83, has vowed to step down after his term ends in 2018, while 87-year-old Fidel Castro is seldom seen in public anymore.

Raul Castro has worked to diversify Cuba’s economy as its ally and benefactor Venezuela struggles with a faltering economy and anti-government protests. Cuba received about 90,000 barrels a day of subsidized oil from Venezuela in 2013, according to state-owned oil company Petroleos de Venezuela SA.

Under the terms of its agreement with Russia, Cuba will pay back the $3.5 billion remainder of its debt during a 10-year period, transferring money to a special account opened by Russian state development lender Vnesheconombank, known as VEB, at the National Bank of Cuba. VEB plans to use the funds for projects in Cuba.

Two years ago, Russia struck a similar agreement with North Korea, writing off 90 percent of its $11 billion debt that dated back to the Soviet period. The remaining 10 percent will be settled via joint projects in health care, education and energy, according to the Russian Finance Ministry.

During Putin’s visit, state oil producers Rosneft and Zarubezhneft plan to sign an agreement with Cuban company Cupet to carry out joint operations in Cuba’s offshore areas. Russian companies are also interested in work at the Mariel special economic zone near Havana, according to Putin.

A senior military official in Moscow said two years ago that Russia was in talks to set up resupply bases in Cuba after undertaking its biggest military overhaul since the Soviet era.

Under the deal that ended the 1962 Cuban crisis, the Soviet Union withdrew its missiles on the island and pledged not to station offensive weapons. Russian military cooperation with Cuba ended in 2002 after Russia closed its radar base at Lourdes, Russia’s only intelligence-gathering center in the Western hemisphere, which had been operating since the 1960s.

– Faries reported from Miami.

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