UPDATE 1-Russia says expects IMF bond deal in Aug or Sept
* Russia to invest $10 bln in IMF bonds
* Part of strategy to help former Soviet allies
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L'AQUILA, Italy, July 8 (Reuters) - Russia expects to strike a deal with the International Monetary Fund in August or September to invest up to $10 billion in IMF bonds, a Russian official said on Wednesday.
"Last week the IMF board agreed in principle to the scheme for such bonds," financial deputy sherpa Andrei Bokarev told reporters, speaking on the sidelines of a summit of the Group of Eight major industrial nations in Italy.
"We expect this kind of agreement to be reached in August or September."
Russian Finance Minister Alexei Kudrin said in May that Moscow was ready to invest up to $10 billion in IMF bonds as part of a plan to help poorer allies struggling with the global financial crisis.
President Dmitry Medvedev has said he wants the money invested by Russia to go through IMF channels mainly to its Central Asian allies. He has not specified how this could be achieved.
The IMF has said it is considering issuing bonds on top of the funds it is receiving from some members, as well as through a Special Drawing Rights issue. The bond issue would be a first for the Washington-based institution.
Bokarev said the volume of new bonds, in which China, India and some other countries have also shown interest, will not exceed $100 billion in the first stages.
They will have an initial maturity of 2 years with a possible extension to 5 years.
Russia had said it would not contribute money to the IMF directly but was interested in investing some of its gold and foreign exchange reserves, the world's third largest, in the IMF bonds, provided that they are liquid.
China, the world's top reserve holder, said on May 10 it would invest in a bond denominated in Special Drawing Rights (SDRs) as part of efforts to increase the IMF's resources.
Moscow has agreed to contribute $7.5 billion to a rescue fund created for former Soviet allies, forming the bulk of it. It also issued credits to Belarus, Armenia and Kyrgyzstan totalling over $5 billion. (Reporting by Oleg Shchedrov; editing by Elizabeth Piper)
