Russia has signed a compact with North Korea that will write off 90 per cent of the debt the DPRK has accrued since the Cold War, and will reinvest the remaining 10 per cent back in the reclusive Asian country.The total debt forgiven is approximately $11 billion.
Negotiations have been ongoing throughout the last four years, but have not yielded any result until now, according to the Russian news outlet RIA Novosti.
AFP reports that in May, Russian Finance Minister Sergei Storchak made a rare visit to discuss settling the outstanding debt. Storchak said that the remaining $1 billion left will be invested in a “debt-for-aid” program, according to the Wall Street Journal.
Storchak said he $11 billion figure was calculated by using the Soviet conversion rate of 60 kopecks to the dollar.
Analysts expect that the deal will help spur new energy projects, infrastructure investment, and the development of new railroads and power lines in the worlds poorest country.
The deal could also help pave the way for a new gas pipeline, that could possibly run through North Korea and help supply the Asian market.
According to Alexander Vorontsov, head of the Korean and Mongolian Studies department at the Russian Academy of Sciences Institute, “the agreement is a success — first, it will improve economic cooperation with North Korea itself and this could gradually lead to the expansion of Russia’s influence in Eastern Asia.”
Some also have perceived the compact as another signal that North Korea’s new leader, Kim Jong Un, is slowly beginning to lean towards granting the impoverished state greater reform and openness.
“The decision on a settlement of debt is a significant step as it removes the obstacles for cooperation,” Vorontsov added. He also noted that the agreement could help “facilitate progress in the six-party talks on its nuclear program.”
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