Diplomats' Memo Causes Stir

Russian President Vladimir Putin said Tuesday that reports Germany and the United States had agreed to withhold financial aid from Russia were a "provocation" aimed at wrecking Moscow's ties with Europe.

He was reacting to the publication in Germany of what was described as a leaked diplomatic cable containing minutes of confidential talks between German Chancellor Gerhard Schroeder and President Bush.

According to the reports, widely quoted in the German press last week, Mr. Bush and Schroeder spoke skeptically about Putin and agreed to deny Moscow financial aid because of capital flight, which the Russian leader himself said was $20 billion last year.

"It is not official information, and I have no reason to believe it," Putin told a news conference after meeting visiting Spanish Prime Minister Jose Maria Aznar.

"As for the publication itself, this is a provocation aimed at destroying the positive trend in relations between Russia and the EU and between Russia and certain members of the EU," he said.

Putin said Russia and Western lenders all shared the common goal of nursing Russia's economy to health so it could pay its debts to countries in the Paris Club of creditors.

"This is an objective situation and all members of the Paris Club are interested in that," he said.

Russia is seeking Western support for a rescheduling of its Paris Club debt. Germany, its largest creditor, has so far resisted repeated calls for debt relief.

On Tuesday, Finance Minister Alexei Kudrin said the Russian government would be able to make all scheduled foreign debt payments in coming years.

"We are going to repay the foreign debt … and meet all obligations of the federal budget without restructuring," the ITAR-Tass news agency quoted Kudrin as telling a meeting of the World Institute of Savings Banks.

He said the government would request restructuring "only in an extreme case, in a dramatic deterioration of the economic situation," Kudrin said.

This year and next, the government's foreign debt payments amount to $14.5 billion annually. They will rise to about $20 billion in 2003, Kudrin said.

The West pumped billions of dollars into Russia after the fall of the Soviet Union. Critics have said much of the aid was wasted as it did not promote reforms but fell into the hands of corrupt officials and wealthy, influential businessmen.

Critics have also said capital flight is a major drain on the struggling Russian economy.

Putin said in a state of the nation address in April that he wanted to fight capital flight as part of his efforts to put the economy on a more stable footing.

The government has already taken steps to cut tax rates and simplify tax rules, seen as one way to convince Russian businessmen to keep their cash at home rather than send it abroad to avoid high taxes and red tape.

The leaked cable has made headlines, both for the conversations it contained and for the apparent security breach it representedRussia was only one of several topics Mr. Bush and Schroeder were reported to have discussed.

Mr. Bush was also quoted as criticizing Putin's position on press freedom and weapons sales to Iran.

Washington and Berlin have so far declined to comment.

© MMI Viacom Internet Services Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press and Reuters Limited and contributed to this report