Russia could repay up to $10bn in foreign debt owed to Paris Club lenders next year if finance minister Alexei Kudrin gets his way. The payment would be skimmed off the growing balance of the oil stabilisation fund and assumes that oil prices would remain above baseline estimates for the 2005 budget of $28 per barrel. Russia owes the Paris Club group of sovereign lenders $48bn.
Although contingent on external factors, the move would be significant for several reasons. It would forestall sales of Russian debt by other governments. Germany repackaged $5bn of Russian debt for resale, tantamount to new Russian issuance, and effectively removed control of debt management from Russian authorities. The German transaction put Russian bond prices under pressure, increasing borrowing costs for Russian companies. Conversely, if Russia was to make the repayment to creditors, yields on Russian debt would fall.
