Foreign investors were yesterday left in the dark over how Moscow plans to restructure $40 billion in domestic debt after the new Russian government delayed an announcement of how the scheme will work.
It was the second time Moscow had postponed the exchange of short-term rouble-denominated treasury bills (GKOs), which is seen as crucial to alleviating its crippling debt burden and restoring confidence in Russia's battered markets.
Mr Victor Chernomyrdin, the new prime minister, yesterday met members of his predecessor's cabinet to go over the plan to convert GKOs due by the end of next year into longer-dated debt.
At the meeting, he said a decision on the restructuring was "very much awaited" and "one must not delay it". However, there was no sign last night of what the next step would be.
Meanwhile, bankers were unimpressed with the results of a meeting between Russian central bank officials to discuss the terms of a 90-day moratorium on repayments of foreign commercial debts. The meeting had been expected to clear up key details of the moratorium.
The central bank said a working group would be formed in September to deal with the moratorium, after a list of creditors and borrowers had been drawn up. However, some bankers said there had been no decision to form any such group. The central bank also discouraged western banks from using "unilateral actions" such as freezing Russian bank accounts, in retaliation for the moratorium.
Foreign bankers gave mixed reactions to the latest developments on the GKO swap. Nerves were frayed last week when the plan was put off after fears that it might discriminate against nonresident holders of the debt. They have already accepted they stand to lose money whatever form the swap takes. Non-residents are thought to hold about $17 billion of the GKO market.
"People already know that there's bad news on the way but it's still better to get the specifics of what one's dealing with than have continued uncertainty," said Mr David Simmonds, head of eastern and central European research at Citibank.
Most bankers expected the restructuring terms to be announced within days. Some said the delay could give the International Monetary Fund an opportunity to make its views known.
It has made no recent public comment on the GKO exchange but is understood to be concerned about how the swap will affect Russia's ability to stick to its pledges on fiscal reform, as laid out in the IMF's recent $22.6 billion rescue package. "I don't have any doubt that the future of the IMF package hinges in part on the debt programme," one banker said.
