Venezuela Seeks Breathing Space from Debt Crisis in Moscow

Venezuela is set on Wednesday to sign a debt restructuring deal with Russia, one of its main creditors and a strategic ally during a crisis that has seen Caracas declared in partial default.

The country is seeking to restructure its foreign debts, estimated at around $150 billion, after it was hit hard by tumbling petrol prices and American sanctions. 

Moscow and Caracas have been negotiating for months the terms of a deal that would restructure almost $3 billion-worth of debt taken out in 2011 to finance the purchase of Russian arms.  

Venezuelan President Nicolas Maduro came to the Kremlin to discuss the restructuring in October, as his country's financial situation further deteriorated following a long-running political crisis. 

Sources familiar with the matter told AFP the signing would take place on Wednesday and the Venezuelan embassy in Moscow announced a news conference for the date, but the Russian finance ministry has not announced an event.

Anton Tabakh, chief economist at the RAEX rating agency, said it was "normal" that Moscow was continuing to restructure Caracas's debts. 

The move allows "both parties to save face and gain time, because now the issue of Venezuelan debt simply cannot be resolved, even formally," he told AFP.

"In practice, it is very rare for countries much weaker than their creditors to repay their debts. Almost always it ends up in restructuring."

Russian finance minister Anton Siluanov last month told Interfax news agency the restructuring agreement would divide up payments into two stages. 

First would be "a small amount of repayment" with "quite favourable conditions," so that Venezuela would be able to pay off the larger part of the debt at the second stage, he said.

This week the Fitch and the Standard & Poor's credit ratings agencies declared Venezuela in "selective default" after two meetings of its creditors in Caracas and New York, fulfilling a threat that had hung over the ruined oil producing country for weeks. 

S&P said that Venezuela had failed to make $200 million in payments on its global bonds, stressing that it acted after a 30-day grace period had passed on payments for two bonds.

Caracas has only $9.7 billion in foreign reserves and needs to pay back at least $1.47 billion interest on various bonds by the end of the year, and then about $8 billion in 2018.

Russia and China are the two main creditors and allies of Venezuela, which owes them a total of $8 billion and $28 billion respectively.

The Chinese foreign ministry on Tuesday said it believed the "Venezuelan government and people have the ability to handle the debt issue of their country," adding that financial cooperation was "proceeding smoothly".