Russia could write off N.Korea's $11b debt: report

MOSCOW (AFP) -- Russia will most likely write off North Korea's Soviet-era 11 billion-dollar-debt to clear the way for closer economic cooperation, Izvestia newspaper said on Wednesday.

Moscow and Pyongyang discussed closer energy cooperation and the outstanding debt when North Korea's secretive leader Kim Jong-Il travelled to eastern Siberia for rare talks with President Dmitry Medvedev last month.

Deputy Finance Minister Sergei Storchak said at the time the first step involved Pyongyang acknowledging that it owes the money to Russia as the successor of the Soviet Union, followed by agreement on the mechanism for the payback.

Citing a source close the finance ministry, Izvestia said however that the finance ministry was ready to write off the North Korean debt without any preconditions because the isolated Stalinist state was hardly able to pay and the unsettled debt was standing in the way of the two countries' closer economic cooperation.

The newspaper said the Russians offered North Korea a scheme under which 90 percent of the debt would be written off, while another 10 percent would be used to implement joint projects in North Korea.

Pyongyang has given its preliminary agreement to the scheme, the newspaper said, adding that all the necessary agreements could be signed by year's end.

The finance ministry declined immediate comment when contacted on Wednesday.

Russia has in the past written off debts of its Soviet-era allies in exchange for their willingness to pursue joint energy projects and buy Russian-made arms.

The projects Moscow is keen to pursue with Pyongyang include a long-stalled plan for a trans-Korean railroad, the construction of an electricity transmission line and a pipeline carrying Russian gas to South Korea via the North.