Powell strikes deal with Russia on debt

Colin Powell gave clear assurances yesterday that the new government of Iraq would repay its $7bn Soviet-era debt to Russia.

The US secretary of state's commitment on the issue, which has become a big sticking point for Moscow, may bring agreement on a new UN resolution for Iraq a step closer.

His comments came on the day that Russia's deputy foreign minister, Georgy Mamedov, said the issue was discussed at Mr Powell's recent meeting with President Vladimir Putin.

Mr Mamedow said "very heated discussions" were going on in New York, but the matter would be resolved.

Russia, which refused to endorse the coalition war against Iraq, said last month it would oppose any attempt to lift UN sanctions before weapons inspectors had returned to Iraq to verify it had been disarmed.

Mr Powell had, hours before Mr Mamedov's remarks, said that, while the question of debt was not discussed during his visit, "we will try to find an approach on how to best solve this problem in some way, perhaps by extending the period in which the debt will be cleared, or maybe refinancing it, or perhaps something else".

He added: "I've no doubts the new government will completely take into consideration its obligations towards Russia."

He also said that the US would consider suspending sanctions rather than lifting them.

Russia's financial concessions in Iraq, which include its national debt and a multi-billion dollar oil contract, have hampered negotiations at the UN.