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. Last Updated: 07/27/2016

Moscow Hopes IMF Will Help if Oil Falls

Finance Minister Alexei Kudrin said Monday the government is seeking an agreement that would let Russia receive new IMF loans if world oil prices should sharply drop.

But as a delegation of the International Monetary Fund prepared for a scheduled Tuesday departure, it was not clear whether the fund and the government would reach any kind of new agreement.

IMF representatives have expressed strong dissatisfaction with Russia’s program of structural reforms, Vremya Novostei reported Monday.

The main items on the agenda of talks that began Nov. 8 included banking reform and restructuring of state-owned monopolies. The monopolies include natural gas giant Gazprom, national power grid Unified Energy Systems and the Railways Ministry.

But regarding both monopolies and the banking system, the fund has had little good to say of late.

"The IMF has not seen considerable progress [on these issues] and needs to see concrete action," said Yaroslav Lissovolik, economics and fixed income analyst at Renaissance Capital brokerage.

Lissovolik said the lack of progress suggested the government was unlikely to achieve its aim of persuading the IMF to let Russia draw funds in the event of a sharp deterioration in the nation’s favorable macroeconomic situation, which is largely based on oil exports fetching high prices.

Gerard Belanger, the head of the IMF delegation, said Nov. 13 that due to the country’s large trade surplus, Russia needs neither new loans nor restructuring of its $43 billion Soviet-era debt to the Paris Club of sovereign creditors.

Meanwhile, talks between the government and the Paris Club on the restructuring of Russia’s debt are tentatively scheduled for December or January, Interfax quoted Deputy Finance Minister Sergei Kolotukhin as saying Monday.

A report by the United Financial Group brokerage suggested the government needs an IMF program of some sort mainly as a precondition for Paris Club rescheduling.

Last week, the government attempted to persuade the State Duma budget committee to allocate 70 percent of any 2001 federal budget surplus to the paying of the country’s debts, Vedomosti newspaper reported.

The draft 2001 budget makes no provision for debt repayments, but its predicted oil price of $18 to $19 per barrel is considered conservative and likely to lead to considerable excess revenues.

On Friday, however, the budget committee voted to allocate only 50 percent of excess revenues to foreign debt payments. UFG said in its daily comment that the 50 percent allocation would be sufficient to allow Russia to service its principal debt obligations.

Prime Minister Mikhail Kasyanov plans to travel to Berlin on Nov. 30 to discuss debt rescheduling with German Chancellor Gerhard Schr?der.

Germany is Russia’s largest sovereign creditor and Russia will seek Germany’s support in advance of official talks with the Paris Club.

However, Germany has repeatedly stated its position that Russia does not need debt relief.

Kolotukhin last week held negotiations in London with some creditors of the London Club, which groups commercial holders of Soviet-era debt.

In February, Kasyanov and the London Club agreed to restructure Russia’s debts to the London Club — writing off $10.6 billion, and postponing the heftiest repayments on the remaining $21.2 billion until 2008.

Kolotukhin’s mission was to carry out the restructuring deal to exchange the London Club debt for new 30-year Russian Federation eurobonds.