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. Last Updated: 07/27/2016

Hopes Remain For Russia Debt Deal

NEW YORK -- Deutsche Bank on Thursday voiced optimism on Russia's determination to resolve its debt woes, but Wall Street analysts earlier concluded that prospects are dim for a rescheduling of the fomer Soviet republic's $26 billion commercial bank debt.


Resignations by the chief architects of Russia's economic reforms have clouded Wall Street hopes on the debt issue, analysts said Wednesday.


But Deutsche Bank, which chairs a committee of bank creditors owed money by Russia, said in a statement that Russian Prime Minister Viktor Chernomyrdin had "stressed that the reforms started by his government would be continued unchanged. The fight against inflation had a particularly high priority."


The creditor committee's chairman, Christian Vontz, had held talks in Moscow Wednesday with Deputy Russian Finance Minister Andrei Vavilov, at which Chernomyrdin had been present, Deutsche Bank said.


Just a few months ago, bankers around the world had hope that Russia would resume partial debt servicing of about $500 million by the end of 1993.


But as economic reforms fell victim to political infighting in Moscow and a few issues complicated debt negotiations, those payments were not made and analysts say hopes of renewed servicing have been temporarily dimmed.


"The market is feeling that debt rescheduling has taken more of a back seat to everything else going on in Russia with all of the political developments right now," said Anjli Bhatia, associate in emerging markets research at J.P. Morgan Securities.


On Wednesday, Finance Minister Boris Fyodorov finally resigned after a week's hesitation, following Yegor Gaidar, the first deputy prime minister who resigned Jan. 16. Both said their departures were forced by shrinking Moscow commitment to rapid economic reform.


On Wall Street, Fyodorov was considered the backbone of the team renegotiating the country's total foreign debt of $82 billion, and he won high marks for seeking debt rescheduling, not outright relief from creditors.


Yet despite a tumble this week in the prices of Russia's defunct loans traded in the New York secondary market, cautious optimism remained that President Boris Yeltsin will pull through and vanquish his hardline opponents.


"This is just part of the unlevel playing field you find in lesser-developed countries," said Jerry Finneran, head of the TCW Americas fund, manager of over $500 million in emerging markets investments, some of it in Russian debt. "There are enormous ups and downs."