Russia negotiating Cuba debt and fresh credit

HAVANA, Sep 27 (Reuters) Russia will make it easier for Cuba to repay 160 million dollar in debt and set aside for now a dispute over Cold War-era credits as it seeks to sell planes to the former Soviet client, a Russian diplomat said today.

Russia will also grant fresh credit guarantees when Prime Minister Mikhail Fradkov visits Cuba this week, a Russian diplomat said today.

Mr Fradkov, the highest-ranking Russian official to visit Cuba since President Vladimir Putin in 2000, was due to arrive in Havana late today for a two-day visit. He is to preside over the signing of the debt agreement tomorrow.

Negotiators from both countries were working out the details this week in Havana.

''The prime minister would not be coming if it was not a done deal,'' the diplomat, who asked to remain anonymous, said.

Russian-Cuban trade has steadily declined since the Soviet Union collapsed and Cuba turned to other countries such as Spain, Canada, China and Venezuela. Cuba's need to replace a vintage fleet of Soviet-era aircraft, however, has opened up new possibilities between the two former allies.

Russia's 2006 budget allocated 5 million for Cuban trade guarantees that would go largely to cover private bank financing for the purchase of Russian commercial aircraft.

Ilyushin Finance Co, Cuba's state-run Aviaimport S.A. and Cubana de Aviacion airlines signed a 110 million dollars agreement in 2003 for delivery of two long-haul Ilyushin Il-96s.

Upon delivery of the two planes this year flag carrier Cubana ordered another two wide-bodied Il-96-300s and three medium-range Tupolev Tu-204s with an estimated value of 250 million dollars, and indicated it was in the market for 20 to 30 more medium-range and short-range planes.

DEBT SQUABBLE PUT ASIDE Russia says Cuba still owes it some 20 billion dollars from the Cold War days when Soviet trade and subsidies to Cuba topped billion per year. However, the diplomat said, ''The old debt is not on the table,'' for the current visit.

Cuba says currencies of the former Soviet bloc no longer exist and those nations unilaterally ended agreements under which the credits were granted.

The dispute raged throughout the 1990s into the first few years of this century as trade dropped to just 200 million dollars by 2005.

''We are negotiating payment of the 0 million debt to the government that Cuba has accumulated since 1993 and that's all,'' the diplomat said, ''along with fresh credit guarantees.'' The amount of Cuba's debt to private Russian creditors was not clear.

Cuba's finances have improved over the last few years as it began exporting medical and other professional services mainly to Venezuela and thanks to high nickel prices.

Cuba imports all its petroleum products from Venezuela including 98,000 bpd with up to 60 percent financing over 25 years at 2 per cent interest.

Meanwhile, China has increased its medium-term trade and development credits to the Communist-run Caribbean island nation.

The central bank last reported the foreign debt as 13.8 billion dollars at the close of 2004.

The bank said 8 billion dollars was ''inactive'' debt built up before Cuba defaulted on its debt in 1986, plus interest, and 5.8 billion dollars was ''active'' debt contracted since then, of which 1.6 billion dollar was short-term debt and 4.2 billion dollars medium and long-term debt.

REUTERS BDP KP2235