Russia floats new debt refinancing, liquidity plans

MOSCOW (Reuters) - Russian officials pledged on Wednesday more support for the financial sector as part of a $180 billion package to help firms refinance foreign debts and offer brokerages access to liquidity.

New measures have been announced almost daily, with Wednesday featuring details of the central bank being allowed to make collateral-free loans to up to 116 of Russia's biggest banks, and news that corporate debt refinancing by state-owned Vneshekonombank will continue into 2009.

Also up for discussion is the possibility of allowing investment companies -- the hardest hit by the drying up of the inter-bank market -- access to central bank refinancing.

"Problems with external debt refinancing -- they will be extremely difficult, if not impossible in the next 15 months," first deputy central banker Alexei Ulyukayev told a conference organized by Vedomosti business daily on Wednesday.

Ulyukayev's comment echoed opinions of ratings agencies, which see refinancing needs of state and private firms as one of the key problems of the Russian economy.

Russian firms borrowed heavily abroad to fuel growth and acquisitions. They will have to refinance $40 billion by the end of 2008 and $80 billion next year, according to Ulyukayev, with partial help coming from up to $50 billion of foreign currency from Russia's reserves stockpile via Vneshekonombank.

The pain of the liquidity crunch was passed on to Russian consumers on Wednesday when state-owned Sberbank SBER03.

Russia's total foreign debt rose by $80 billion in the second quarter of 2008 to $527 billion due to borrowing by state and private banks and firms, data showed on Wednesday.

Russia has amassed the world's third largest forex reserves of $560 billion during the oil and commodities price boom of the past years.

Moscow says its economy is well protected from the global crisis and could even sustain a sharp decline in oil prices, the key source of budget revenues.

Prime Minister Vladimir Putin said the market's problems would not affect Russia's long-term economic strategy to 2020, which the government approved on Wednesday.

However, analysts warn the oil price collapse would force the country to cut social spending drastically and its decade-long economic boom would stall.

LIQUIDITY CONCERNS EASE

Financial authorities have said the country is suffering more from a crisis of confidence rather than a real liquidity crisis after pumping billions of dollars into the system.

In a new liquidity-boosting measure, the central bank plans to start lending money to credit-rated banks without collateral by the end of 2008, Ulyukayev said.

The package of liquidity measures could be expanded to investment companies, including brokerages, a document seen by Reuters showed.

Brokerages meeting certain criteria could get access to the central bank's short-term refinancing operations, but may need to get banking licenses.

In response to easing liquidity problems, money market rates slid to their regular 5.0-5.5 percent range from as high as 8 percent on Tuesday as a peak of tax payments passed.

The finance ministry also canceled an $11.8 billion auction of budget funds due to a lack of demand from commercial banks.

Finance Minister Alexei Kudrin told the same conference he was concerned oil prices could fall as low as $70 per barrel because of the global economic slowdown and urged the United States to approve the bailout plan for Wall Street.

"I think (U.S. Treasury Secretary Henry) Paulson's plan is essential. It is the responsibility of the United States to other countries," Alexei Kudrin

Troubles in the U.S. financial sector have added to pressure on the Russian stock market, which suffered badly in August from emerging market outflows and Russia's war with Georgia.

A sharp decline in the oil price since June also contributed to the plunge of oil-dominated Russian indexes, which are down more than 50 percent from their peaks in May.

"A possibility that it (the oil price) can go below $70 (per barrel) exists... But most likely it will fluctuate around $90 and slightly lower," Kudrin said.

(Writing by Dmitry Zhdannikov; Editing by Toby Chopra)