Moscow has written off Libya's $US 4.6 billion Soviet-era debt in exchange for lucrative contracts for Russian companies. The agreement was reached during President Putin’s two-day visit to the oil-rich African state where he met with its leader Muammar G

Putin said both sides were satisfied with the way the debt issue was solved.

“The negotiations on solving the problem of the state debt have been going on for several years, and they were especially intensive over the past year and a half. I’m absolutely sure that the pattern we've found will benefit both the Russian and Libyan economies and the Russian and Libyan people. This is because we will use these funds not only to invest in Russian defence companies and to increase Libya's defence capability, but also to inject money for projects which help the population as a whole. In particular, one of the most important tasks which face the Libyan government is the development of the country's infrastructure,” he said.

Because of the unsettled debt Russia had previously been losing Libyan contracts to other countries.

“The Russian position is much stronger. No other country has received any of the contracts that Russia has received. And these are not just promises, these are concrete contracts that have been signed today,” said Aleksey Kudrin, Russia’s Finance Minister.

Earlier, the Russian President enjoyed breakfast at the Libyan leader's residence. It's reported that during the meal the Libyan leader stressed the dangers of a unipolar world and the need to prevent this from taking shape.

Trade deals

Important agreements ranging from oil to investment were reached on day one of the visit.

Libya is experiencing a major construction boom. The government in Tripoli plans to spend $US 50 billion on roads alone, so it’s no wonder companies around the world are keen to work there.

Russian Railways, a state-owned company, has signed a $ US 3.48 billion contract to build a stretch of line between the Libyan cities of Sirte and Benghazi.

“This railway will go along the Mediterranean coast, linking Egypt and Tunisia. The Libyan side is paying for the construction work. We received the contract without tender,” said Vladimir Yakunin, the head of Russian Railways.
 
Another major deal that has been signed during this visit is between Russia’s Gazprom and Libya’s National Oil Company. The two oil giants have agreed to form a joint-venture to search for hydro-carbons in North Africa.

Gazprom chairman Aleksey Miller said the venture will work in all areas of gas and oil prospecting, including geological exploration, development, transportation and supply.

“We’ve also agreed that electricity will be part of our joint work. The advantages of using gas to produce electricity are obvious,” he added.