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Australian wool exporters owed more than $100 million by Russia

PAUL MURPHY: The outlook looks grim for Australian wool exporters waiting for payment on wool exported to Russia. It now appears the $100M debt they're owed by the Russians is part of a $2B debt problem affecting exporters to the region from around the world. Here's our rural reporter, Catherine Hurley.

CATHERINE HURLEY: The full extent of Russia's debt problem is just beginning to be felt by Australian exporters. That's the view of Vice President of the Australia USSR Business Council, Ian McGuiver. As reported on PM last night, Australian wool exporters are owed more than $100M for wool already supplied to the Soviet Union. But Ian McGuiver believes this is just the tip of the iceberg.

IAN McGUIVER: In addition to wool of course, you have wheat, which at the present time probably hasn't been affected because there are no outstanding wheat shipments from Australia although wheat shippers from other countries have experienced payment difficulties. We also have of course the sheep meat. I mean, Russia traditionally is a big buyer of mutton. It would be fair to assume that they could also .. that could also be affected. I guess all commodities have to face the fact that they may have to wait for their money.

CATHERINE HURLEY: It's not only the food commodities either, is it? We've got some fairly large exports of minerals to the area.

IAN McGUIVER: Well that's right. Food, if anything, seems to be getting a preference for being paid first. That was the message the last time we spoke to the Russians about this matter - food definitely had a priority - I would imagine well in advance of the type of commodity you're referring to.

CATHERINE HURLEY: We're talking about very large sums of money here, I mean we're talking over $100M for wool. What about the other commodities like wheat, for example? What sort of debt levels are there on the international scene?

IAN McGUIVER: I think they're certainly higher. Whilst I don't have the .. that information at hand, talking to people around the world, I understand that the wheat chippers even singly .. some of the major wheat shippers in the world, or grain shippers in the world, had debts in excess of $100M on a company for company basis.

CATHERINE HURLEY: If we assume that there are outstanding debts of $100M for wool, and there are a couple of grain shippers that have debts of similar levels, we're looking at a debt level of at least $300M around the world.

IAN McGUIVER: I would say, far more than that. I would suggest far more than that, because there must be other commodities that we haven't even talked about that would be affected. The suggestion is that the foreign trade organisations in Moscow have all been instructed or asked to try and get the maximum payment terms, and I'm quite sure that if you look at the Soviet imports worldwide, that would amount to several billion dollars, I would think.

CATHERINE HURLEY: So, given that grim scenario, what's to be done to help solve the problems of Australia's wool exporters? Ian McGuiver says it's not the first time Eastern bloc countries have had trouble paying for wool, and the government, and the banks could help.

IAN McGUIVER: I guess the precedent, if that's the right word, would be the case of Poland, when the Eastern European .. when the first Polish blow-up came some years ago and the Government, in an effort to assist Poland, and also to assist the Australian wool grower, did set up a credit line for Poland with the ?? guarantee, and that .. my understanding is that line is still in place, and that worked perfectly satisfactorily. It certainly helped the Australian wool grower in that they .. by doing that, they retained the Polish competition. It helped the Australian wool exporter, who .. or the supplier at the time, because he was guaranteed payment, and to my knowledge, the Poles honoured their side of it and, everyone was happy.

CATHERINE HURLEY: It's becoming increasingly obvious though, that the Australian Government is extremely worried about the situation with the wool market at the moment. Do you think that they're going to be prepared to enter into an agreement like that with the Russians at this stage, if the exporters approach them?

IAN McGUIVER: Well I can't answer that because the Australian Government obviously may view Russia differently to Poland for example, but I think they would certainly have to give it some consideration. Whether the exporters approach them or it's done through Government channels or banking channels, remains to be seen.

PAUL MURPHY: Ian McGuiver, Vice President of the Australia USSR Business Council, with Catherine Hurley.