TIME Debt

Russia Agrees Deal to Slash North Korean Debt by 90%

North Korean soldiers march near trains after a ceremony to mark the re-opening of a railway link between Russia and North Korea at the port of Rajin Sept. 22, 2013 Yuri Maltsev—Reuters

Russia has finalized an agreement that will write off almost $10 billion owed by North Korea since the Cold-war era, with plans to build a gas pipeline and railway to South Korea through the communist state

Russia’s parliament has agreed to reduce North Korea’s debt from $10.96 billion to just $1.09 billion to be paid off over the next 20 years.

According to Reuters, Russia’s deputy finance minister Sergei Storchak told media that the remaining debt, to be paid off in six-monthly installments, could be used to fund mutually beneficial projects in North Korea, including a gas pipeline and railway through the Hermit Kingdom to South Korea.

The relationship between the two Koreas remains tense and they are separated by one of the world’s most militarized frontiers. North Korea’s struggling economy is just 2% of the size of its southern neighbor.

North Korea is the latest in a line of impoverished Soviet-era allies to have its debts written off, after Cuba in December last year. Russia’s state-owned leading natural gas producer, Gazprom, has been angling to build a gas pipeline via North Korea for many years.

Russia also aims to reach a deal next month to supply gas to China following a decade of talks, demonstrating Moscow’s efforts to diversify its energy sales to Asia and away from Europe.

[Reuters]

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