Russia cautious on buying euro zone bonds

Reuters News
Posted: Sep 15, 2011 5:20 AM
Russia cautious on buying euro zone bonds

By Lidia Kelly

MOSCOW (Reuters) - Russia will be cautious about investing in euro zone bonds, including Spanish and Italian debt, the deputy finance minister with responsibility for the country's debt told Reuters on Thursday.

The BRICS emerging economies, including Russia, are considering whether to support Europe by using their currency reserves to buy bonds and help solve the euro area debt crisis.

"It's quite possible, we need to look at it, but we need to be cautious," Sergei Storchak, Moscow's sherpa to the International Monetary Fund and the Group of Eight industrialized countries, said in a phone interview.

Brazil has said it is ready to help Europe and was in talks with the four other BRICS -- Russia, India, China and South Africa -- to make coordinated purchases of bonds of euro zone countries.

But Storchak said that Brazil's plan on a common BRIC support to the euro zone was news to Moscow.

"There had been no preliminary talks," Storchak said. "It was all news to me."

He said that Moscow was ready to participate in such talks during the scheduled September 22 meeting of BRIC finance ministers in Washington.

Russia is also keeping an eye on progress toward a common euro zone bond, he said. European Commission President Jose Manuel Barroso said on Wednesday options for the introduction of euro area bonds would be presented soon.

Storchak said Russia would need clarity on guarantors of such a paper before making any investment decision.

"We need to see who is going to be responsible for that," he added.


Russia, the holder of the world's third largest gold and foreign exchange reserves, has the financial firepower to increase its investment in euro zone instruments.

Storchak pointed out that 45 percent of that fund, which now stands at $543 billion, is already kept in euros.

"That means that we continue to invest in the euro all the time," he said. "Isn't it enough?"

The finance ministry is in charge of two sovereign wealth outlets, the Reserve Fund and the National Welfare Fund, which are included in the overall gold and forex reserves kept at the central bank.

The National Welfare Fund, aimed at supporting the country's pension system, is to be kept at 10 percent of the country's gross domestic product. Extra oil windfall revenue is transferred to the other holding, the Reserve Fund.

If the Reserve Fund increases, this gives the ministry additional cash to play with, Storchak said.

The fund stood at 772.3 billion roubles ($25.4 billion) at the beginning of the month and Prime Minister Vladimir Putin had pledged earlier this year that by the end of December the coffer will rise to 1.5 trillion roubles.

Storchak reiterated what Finance Minister Alexei Kudrin had told Reuters on Tuesday, that aside from Cyprus, no other euro zone member approached Moscow seeking financial help.

($1 = 30.455 Russian Roubles)

(Writing by Lidia Kelly; Editing by Andrew Callus/Anna Willard)