Updated September 16, 2008

   The Russian

Ministry of Finance announced the deadline of submitting the applications for the exchange of the former USSR's debt for the Eurobonds of Russia. It goes about the latest tranche of the Soviet Union's commercial debt of nearly $600 million. The reconciliation of the debt of the commodities' delivery to the soviet foreign trade organizations at the end of the 80th- the beginning of the 90th of the l ast century is being finished

as well.

Russia has to pay off about $1,5 billion more of the soviet debt to the Paris Club and $40 billion of its own debts as well.

   On September, 15, the Russian Finance Ministry announced the statement made by the government of the Russian Federation about the completion of submitting applications for the exchange of the former USSR's commercial debt. According to the document, the term expires on October, 15, 2008 at 18.00 Moscow time, and the Ministry of Finance will not take the applications anymore. The potential volume of applications for the commercial debt is estimated at about $600 million, in the Ministry reported.

   In the Ministry of Finance explain the completion of submitting applications by the "quite long period within which their owners had the opportunity to set requirements concerning the conduction of the reconciliation". The major part of the debt that was formed at

the end of the 80th- beginning of the 90th of the last century due to the commodity deliveries to the soviet state companies, was exchanged for the Russian bonds via two tranches – in 2002 and 2006. In 2002, the applications of the lenders for the sum of $1,28 billion were exchanged.

The exchange of the second tranche took place at the end of 2006 to the total sum of $1,075 billion. The commercial debt was exchanged for the Russian Eurobonds with the maximum terms of repayment in 2010 and 2030.

The securities with the analogical terms of repayment will be used this time as well.

   However, within the exchange, the amount of claims can be lower, than the Ministry of Finance expects. In the Ministry mark that the key trouble during the reconciliation of the debt was the activity termination of the former USSR' s commodity vendor

s or the debt relief by the trade partners in the middle of the 90th. However, if anyone doesn't manage to submit the application to October, 15, he may use the loophole. They can demand that the Russian importers and Vnesheconombank (the Bank for Development and Foreign Economic Affairs) pay the debts in those cases, when the bank has taken part

in the delivery contracts of the commodities to the USSR.

   The external debt reduction is one of the tasks set by Vladimir Putin to the government in 2000.

Within eight years, the size of the external debt was cut from $155 billion to $41 billion. The $1,5 billion debt to the Paris Club is left. Other debts belong to the already independent Russia. The largest unpaid debt (nearly $4,7 billion) is to the World Bank.

   The repayment of the external debt would hardly influence on the loan ratings of Russia, since the volume of the Eurobond issue, for which the Russian Federation's commercial debt will be exchanged, plays insignificant role in the overall debt of Russia to the owners of the Eurobonds. However, Russia has already exhausted the resource of raising the borrowings rating via the reduction of the external debt in 2006. Thus, the Russian Union of Industrialists and Entrepreneurs (RUIE), in the answer to

the budgetary strategy of the Russian Finance Ministry, has criticized the declaration of refusal from the external state borrowings for the first time.

In the Union's opinion, one should focus on the cost of the loan resources, instead of the source of the financing.