|                                                                                                                                                             |  | SETTLING  USSR TRADE  DEBT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsPublicationsSourcesof FinanceLeadsand EventsExchangeRatesState ExportsOtherSources** |  | July 1997by Matthew EdwardsWhen the Soviet Union collapsed in 1991, many Soviet state-owned foreign trade organizations
(FTOs)--previously reliable customers--defaulted on uninsured credit purchases of goods or
services from Western suppliers.  As a result, from 1991-1995, the U.S. Department of
Commerce received reports from more than 50 U.S. companies owed a total of over $200 million
by former Soviet FTOs (out of an estimated $7 billion of such arrears owed to firms
worldwide).Russia formally assumed responsibility for most Soviet trade debt in October 1994 and advised
private-sector creditors to form national "trade creditor groups" (TCGs) in order to negotiate the
settlement of claims associated with this debt.  TCGs were organized in 11 European countries
and in Japan.  Some U.S. creditors considered this approach, but ultimately were unable to agree
on formation of an American TCG.  Representatives of the 12 TCGs negotiated rescheduling of
uninsured trade debts, culminating in a December 1996 agreement.  While some smaller
companies may consider the terms of this settlement too lengthy, several U.S. firms have chosen
to pursue their claims through the Forum of Trade Creditor Groups, and  it still may be a viable
option for some.Companies holding USSR trade debt have attempted to settle claims in several ways.  Under
terms of the December 1996 agreement, well-documented smaller claims (i.e., under $75,000 and
not resulting from sale of a stake in a larger claim) may be purchased for cash by the Russian
Finance Ministry or its authorized bank, at the prevailing market price for eligible debt.  Other
companies have attempted, with mixed results, to settle larger claims by negotiating directly with
the Russian Government.  The Finance Ministry's Department for International Credit
and External Debt is responsible for such negotiations.  According to anecdotal reports,
negotiated settlements of Soviet FTO debt have returned between 19 and 50 cents per dollar of
debt for successful creditors.Rather than negotiate with the Russian Government, many creditors have opted to sell their
claims to firms that purchase debt on secondary markets.  Reportedly, companies have sold claims
in this way at prices ranging from 80 cents per dollar for large, well-documented claims, to as
little as 8 cents per dollar.  Creditors weighing this option should shop around when choosing a
buyer for USSR trade debt, since prices vary with time and according to the size of the claim and
the strength of supporting documentation.  In general, market prices for Russian FTO debt have
risen since late 1996, when Russia received a better-than-expected report from global credit
agencies and when the TCG accord was announced.Firms holding Soviet-era trade claims have several options, which they should consider carefully.The Department of Commerce does not endorse any particular settlement option, but
provides the following information to assist U.S. creditors, based on the best information
available to the Department.  For more information on  the Forum of Trade Creditor Groups,
which is coordinated by  Deutsche Morgan Grenfell, contact Mr. Ken Thomas in London, at
011 44 (171) 545-8000 (voice).  For information on secondary markets, contact Mr. Robert
Smith of Turan Corp., at 617-439-7614 (fax); Ms. Leisa Little of  Lazard Bros., at 212-632-6673
(voice); Mr. Dmitri Efimov of Bank of America, at 212-836-5206 (voice); or Mr. Alex
Kirzhnev of New Alliance Corp., at 203-695-7000 (voice).  To pursue claims directly with the
Russian Government, contact the Economic Section of the Russian Embassy in Washington,
D.C., at 202-298-5741 (voice), or the Russian Ministry of Finance (Mr. Alexei Smirnov) at 
011-7-095- 921-0642 (voice).Matthew Edwards is Senior Russia Desk Officer for the Market Access and Compliance unit of
the International Trade Administration.  Desk Officer Inga Litvinsky also contributed to this
article.This report is provided courtesy of the Business Information Service for the Newly
Independent States (BISNIS)