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Russia cancels Libya's $4.5 bln debt in exchange for contracts-2

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The cancelation of the debt, accrued on Soviet arms supplies, was one of over a dozen intergovernmental trade and cooperation agreements signed by Russian President Vladimir Putin and Libyan leader Muammar Qaddafi.
(Recasts throughout, adds details, background)

TRIPOLI, April 17 (RIA Novosti) - Moscow wrote off on Thursday Libya's $4.5 billion debt in exchange for multi-billion dollar contracts for Russian companies.

The cancelation of the debt, accrued on Soviet arms supplies, was one of over a dozen intergovernmental trade and cooperation agreements signed by Russian President Vladimir Putin and Libyan leader Muammar Qaddafi.

After the signing ceremony, the outgoing Russian leader told reporters: "We are satisfied with the way we have resolved this problem. I am absolutely convinced that the scheme we have arrived at will benefit both the Russian and the Libyan economies, as well as the Russian and the Libyan people."

Finance Minister Alexei Kudrin, who accompanied Putin on his visit to the North African state, told reporters that the size of Libya's debt to Russia had been brought down by $100 million from $4.6 billion to take into account Russian state bank VTB's debt to Libyan companies.

The deals signed include a $3.5-billion contract for rail monopoly Russian Railways to build a 500-km (310-mile) section from the city of Sirte to Benghazi, Putin said.

Kudrin said 70% of the equipment and steel products required for the project would, under the contract, be supplied by Russian companies.

Another major deal was closed between Russian natural gas giant Gazprom and Libya's National Oil Corporation to set up a joint venture to engage in both upstream and downstream oil and gas operations.

Kudrin said the Soviet-era debt had hampered bilateral economic cooperation, whereas now the hurdles would be removed, adding Russia's position in Libya had grown stronger.

The two countries also signed a military cooperation agreement.

Libya's main weapons supplier during the Cold War, Russia is trying to regain its position in the country.

Earlier reports said Russia had hoped to sign arms contracts worth some $3 billion with Libya, selling 12 of the latest Su-35 Flanker multi-role fighter and Tor-M2E short-range missile systems, and offering spare parts and maintenance services for Soviet-era military hardware.

Libya's ties with the West have improved since the UN lifted sanctions against Libya in 2003 after Qaddafi announced he would halt the country's nuclear weapons program and later accepted responsibility for the 1998 terrorist bombing over Lockerbie in Scotland, agreeing to pay compensation to the victims' families.

Russia's president arrived in Tripoli on Wednesday for a two-day visit. This evening he will leave for Sardinia, to meet with Italian incoming-prime minister Silvio Berlusconi.

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