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Russia should consider eurobonds in 2010: Kudrin

MOSCOW - Russia should consider external borrowing in 2010 and hold an investor roadshow this year as it faces falling oil revenues and the prospect of a prolonged economic crisis, Finance Minister Alexei Kudrin said on Tuesday.

That would be the first Eurobond for Russia since 2000, and marks a turnaround for a country which has worked hard to pay off its debts following the 1998 crisis and default.

Russia has amassed $121 billion in a ‘rainy day’ Reserve Fund, but the Finance Minsitry reckons the money will only plug budget deficits until mid-2011 [ID:nLA686486] -- not long enough to see Russia through to the end of the current crisis.

“For us, it will take several years to exit the crisis,” Kudrin told a Finance Ministry meeting.

“We need to look at the possibility of entering the external market already in 2010 and this year to hold a roadshow ... which will allow international investors to get better acquainted with our aims and plans,” he said.

Russia may need to seek external financing if the price of oil, its main export commodity falls to $30 per barrel, the World Bank forecast in December [ID:nLJ115272]

But even with oil prices URL-E well above the $41 per barrel price factoring to the 2009 budget, Kudrin sees the Russian government’s forecast the economy will contract 2.2 percent in 2009 as “optimistic”.

The fall in oil revenues will force Russia to spend more wisely, Kudrin said.

This year’s budget deficit is seen at 8 percent of gross domestic product or 3 trillion roubles ($89.69 billion). For 2010, it is seen at 5 percent of GDP, but the Kremlin’s top economic aide Arkady Dvorkovich said on Tuesday that would be too high.

“It should be lower (than 5 percent), otherwise it will create excessive risks for the economy,” he said.

Interest Expected

With just $28.4 billion in outstanding foreign debt [ID:nL7944010] and investment-grade sovereign ratings, Russia can afford to borrow again, analysts said.

“Even in the heat of the crisis Russia could count on significant interest for a new sovereign debt issue,” Mikhail Galkin, analyst at MDM Bank said.

Russia’s gas export monopoly Gazprom GAZP.MM is now marketing a $2 billion Eurobond, to be the first benchmark transaction since the crisis effectively blocked debt markets for Russian companies in July 2008. State bank VEB is also planning to issue Eurobonds this year.

Analysts have said Russia is looking into the possibility of external borrowing, and the government could be asking Gazprom to test the water.

Russian also plans to borrow 656 billion roubles ($19.61 billion) on the domestic market in 2010, Kudrin said.