* Medvedev pledges extra $36 billion for Russian banks
* Move fails to rally Russian stocks
* Russia confirms talking about loan to Iceland
* Oil firms seek state funds, tycoon scraps asset split
By Gleb Bryanski and Michael Stott
MOSCOW, Oct 7 President Dmitry Medvedev
announced an extra 950 billion roubles ($36.4 billion) of
long-term help for banks at an emergency Kremlin meeting on
Tuesday, but failed to rally Russian stocks.
"The whole point of our work is to make decisions as quickly
as possible," Medvedev told reporters. "Speed is now priceless."
Russia, which has large foreign exchange reserves and is
rich in oil, gas and metals, had looked among the better placed
nations to withstand the global financial crisis but Moscow has
been among the worst affected markets.
In a surprise move, Iceland said it wanted Russia to extend
a 4-billion euro ($5.4-billion) loan from its huge reserves to
strengthen the Nordic island's currency.
Finance Minister Alexei Kudrin said Moscow viewed the
request "positively" and would make a final decision on it after
negotiations with Icelandic officials.
Kudrin also said the extra funds for banks, offered for
periods of at least five years, would help ease the credit
crunch by allowing banks to lend over long periods.
Of the money, 500 billion roubles would come from the
central bank and the rest from the state budget, he said. Much
of it would be funnelled via state savings bank Sberbank
The crisis meeting took place in the Kremlin one day after
Russian stocks suffered their heaviest one-day falls. The
dollar-denominated RTS index .IRTS collapsed by 19.1 percent
as panic gripped the market and investors fled to safe havens.
MEDVEDEV MOVE FAILS TO IMPRESS MARKET
Tuesday's bailout sparked a brief stock market rally but it
quickly petered out and Russian shares touched new three-year
lows. The rouble-based MICEX index closed 0.96 percent
down at 744 points, and the dollar-based RTS ended the day 0.95
percent down at 858 points.
"The measures are certainly having a positive impact on the
margin -- every time they announce more measures you see the
market rebound but ultimately it is not in the hands of the
domestic authorities," said Ivailo Vesselinov, senior EEMEA
economist at Dresdner Kleinwort in London.
"Given the uncertainty with regard to the banking sector
everywhere, there is so much uncertainty and so much risk
aversion that there is no appetite for anyone to consider even
markets such as Russia which appear to be oversold."
Holder of the world's third biggest foreign exchange
reserves, almost free from sovereign debt and sitting on a huge
stream of hard currency earnings from oil, gas and metals,
Russia has an enviable cash flow.
Dipping into its wealth, Moscow has already unveiled a
$180-billion rescue package ranging from liquidity injections
and tax cuts to the possibility of using budget funds to buy
But with an economy heavily dependent on raw material
exports, and market sentiment on Russia damaged by the August
war with Georgia and government moves deemed anti-business,
Moscow has been badly affected.
Sharp falls in the price of oil and major metals have hit
leading Russian companies as fears grow that a global recession
means lower demand for energy and commodities.
The financial strain of the bailout and of supporting the
rouble is starting to show. Russia's central bank said on
Tuesday that its reserves fell by $25.57 billion in September to
Traders said they saw the central bank again supporting the
rouble on Tuesday, selling some $4 billion, on top of dollar
sales of about $5 billion the previous day.
Even Russian oil companies appeared to be feeling the pain.
Benchmark Urals crude slipped to $81.52 a barrel URL-E.
LUKOIL (LKOH.MM), the country's biggest private sector oil
company, said it and three other big energy firms including
Gazprom were seeking loans from the government to help them
refinance debt and buy new assets abroad.
Analysts say a number of major Russian oligarchs have
financed expansion via loans guaranteed against the stock of
their companies, making them vulnerable to a market collapse.
In a sign that such deals might be scrapped, tycoon Mikhail
Prokhorov told former business partner Vladimir Potanin he would
pull out of an asset split deal, citing force majeure, a
spokesman for Potanin's business unit said.