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. Last Updated: 07/27/2016

Russia Faces Fight For More IMF Debt Help

Shackled by heavy debts, Russia is angling for help from the International Money Fund to squeeze concessions from foreign creditors.

An IMF delegation opens talks with Russian officials Wednesday with the goal of determining whether Russia deserves more loan assistance.

IMF officials say the most Russia can hope for is a so-called precautionary agreement, which would allow it to draw upon funds only if the country's economic situation worsens sharply.

After a string of Russian defaults and broken promises to reform its chronically underperforming economy, analysts say the IMF and Western creditors are more skeptical than ever about Russian pleas.

Russia's real aim, they say, is leverage with the Paris Club - the group of creditor countries that Russia says it can't pay on time. Under international financial practices, an IMF agreement - even a precautionary one - is a prerequisite to even opening talks with the Paris Club to restructure its debt obligations.

Russia owes the Paris Club roughly $48 billion. It is scheduled to pay some $3.5 billion this year, but already has failed to make some payments this month.

Prime Minister Mikhail Kasyanov and other officials argue that paying the debt will bust Russia's budget, which has undergone particular strain because of a cold winter that has sent home heating costs higher.

Last year, Kasyanov, then Russia's chief debt negotiator, won a restructuring from the London Club of commercial creditors, who agreed to write off about a third of the $31.8 billion they were owed, and gave Russia a seven-year delay on paying the rest.

But the Paris Club members have insisted that Russia pay up or risk becoming an international financial outcast - especially in Germany, which is owed some $30 billion. Germany's Deputy Finance Minister Caio Koch-Wester said Russia should be forced to give up its membership in the Group of Eight leading industrial nations if it does not pay.

Several analysts doubted that the IMF would give Russia what it needs. They point to Russia's $60 billion trade surplus last year - mostly reaped from sky-high world prices for oil, Russia's chief export and source of government revenue.

Russia is "not likely to get a program," said Roland Nash, chief economist with Moscow's Renaissance Capital investment bank. "Even the Russians realize that the economic situation doesn't justify more financing."

Nash said the IMF delegation would seek proof that Russia was making attempts to clean up its poorly regulated banking system, which collapsed in August 1998. But, he said, little progress has been made since then.

But Clifford Gaddy, a scholar at the Brookings Institution in Washington, D.C., says that Western lenders and governments may not want an ugly confrontation with Russia over debt. As a result, the West may revert to past practice of making loans or concessions and then accepting Russian officials statements that they are fixing their economy - even when they're not.

"Nobody in the West is going to push Russia to the wall on this," he said, predicting "a strong dose of pretense and ultimately an agreement."