IMF chief takes Europe rescue talks to Russia

before visiting Asian giants China and Japan.
Lagarde’s two-day stay in Moscow – her first official foreign trip outside the European Union – will include talks today with president Dmitry Medvedev and meetings at the finance ministry and the central bank.

The Kremlin said the European public debt crisis will dominate negotiations just as it had done at the recently concluded G20 summit in Cannes. Medvedev and Lagarde will also discuss “further steps on reforming the global financial system,” the Kremlin said.
Resource-rich Russia has resisted offering direct assistance to Europe and instead preferred to funnel funds or other measures through the safer investment mechanisms made available by the IMF.

But Medvedev’s top economic adviser said that even the extra funding being negotiated with Lagarde’s agency would be limited to US$10 billion – a token figure when compared to the US$100 billion being discussed with China.

Strong prices for Russia’s energy exports have left Moscow in a prime position to make European investments that help revive important market demand.
Economists note, however, that the Russian government only has about $100 billion left in its special rainy-day fund after spending most of it on recovery measures from the 2008-2009 crisis.

The US$520 billion in international reserves held by the central bank meanwhile are mostly invested in low-risk government bonds rather than the high-yield debt available from struggling nations such as Italy and Greece.

“If we ever see any eurozone bonds, the central will be a big buyer,” said Alexei Moiseyev of VTB Capital in reference to a European funding option resisted in the past by Germany. – AFP.