Russia to Agree N. Korea Debt Settlement

The Russian government is this month set to agree a framework to settle North Korea's $11 billion debt to Moscow dating back to Soviet times, a deputy minister said.

Russia's Deputy Finance Minister Sergei Storchak made a rare visit by a top Russian official to Pyongyang from May 31 to June 2 to discuss the settling of the outstanding debt.

"There now needs to be an internal (Russian government) agreement and I think we will already submit a draft this month so that the government can confirm the results of the accords," the finance ministry website quoted him as saying.

Storchak did not give precise details on the nature of the debt settlement.

The Izvestia newspaper reported last year that Russia would write off 90 percent of the debt and that the other 10 percent would be used on joint development projects in North Korea.

In a statement on the sidelines of the Saint Petersburg economic forum, Storchak did confirm that part of the settlement would involve investment in energy, health and education projects in the isolated Stalinist state.

North Korea's poverty makes paying back the full sum unrealistic and analysts have expected Moscow to allow the most favorable terms so that the issue does not impede joint cooperation.

The debt was discussed in August last year at a rare summit in the Siberian city of Ulan-Ude between North Korea's late leader Kim Jong-Il and Russia's former president Dmitry Medvedev.

Kim Jong-Il died in December with his son Kim Jong-Un taking the reins of power and it is not clear if his rule has brought about any change of policy on the Moscow debt.

Until recently, the talks on the issue seemed deadlocked with Moscow insisting Pyongyang needed to acknowledge that its owes the money to Russia as the successor of the Soviet Union

But Moscow is keen to pursue several projects with its neighbor, including a trans-Korean railroad, the construction of an electricity line and a pipeline carrying Russian gas to South Korea via the North.