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. Last Updated: 07/27/2016

NEWS ANALYSIS: Investors Upbeat Despite IMF Delay




Russia can get by without new loans from the International Monetary Fund and pay its debts, but a decision to hold up the cash could complicate negotiations with the London Club of creditors, analysts said Wednesday.


"Russia survived this year without any significant funds and oil prices are better, so they should be able to survive," said Peter Boone, director of research at Brunswick Warburg investment bank.


Roland Nash, an economist at Renaissance Capital, said the IMF's decision to withhold the second $640 million tranche of a $4.5 billion loan package could make debt restructuring talks with the London Club of private creditors more difficult.


"However, with oil prices at current levels and with revenue collection at recent highs, Russia can survive without disbursement and still meet its remaining debt obligations," Nash said.


Western pressure on Moscow over the Chechnya war will increase the volatility of Russian markets in the short term but is unlikely to dent foreign enthusiasm for the country's shares, fund managers said Wednesday.


Foreign investors said the suspension of the loan does not affect their view that Russian shares are cheap for a recovering economy.


"Unless things significantly deteriorate I don't expect a massive foreign sell-off," said Douglas Helfer, East Europe fund manager for Foreign & Colonial in London.


Foreign condemnation of the military offensive in Chechnya and the IMF move wiped more than 4 percent off Russia's benchmark stock index on Wednesday morning, following a similar decline Tuesday. Russian Eurobonds have also suffered, falling about 6 percent since the start of the week.


First Deputy Prime Minister Viktor Khristenko told NTV television the government would continue to follow policies agreed with the IMF in July and he saw no problems with debt servicing or meeting budget targets. "We will not see any tragedy or drama as far as December is concerned," he said.


The IMF made no mention of Chechnya in a detailed statement outlining the loan conditions which Russia had to fulfill.


These included approving new rules on bankruptcy, increasing cash payments for energy supplies and rail freight services, audits for state-controlled funds and improved accounting methods for the country's biggest monopolies.


Boone said it could take some time to meet these "structural benchmarks" as the State Duma has ended its final session ahead of a Dec. 19 election.


"Some laws, for example bankruptcy, require new legislation and that will have to go through the Duma, and you have a new Duma next year. It will probably take several months," he said.