Russia is close to striking a deal with Paris Club creditors to pay off billions of dollars of its debt early, The Moscow Times (Russia) reports a senior Finance Ministry official, who spoke on condition of anonymity, said Monday.

Russia, which owed $47.7 billion to the 19-member Paris Club at the start of the year, wants to use record oil revenues to pay down debt ahead of schedule and avoid another sale of repackaged debt on the market. At a briefing Monday, Finance Minister Alexei Kudrin said the government may spend $7 billion to $10 billion from the so-called stabilization fund on early debt repayment. Kudrin is fighting to defend the fund from other ministers, most of whom are eager to spend the windfall revenues on a variety of sometimes exotic projects Kudrin would only say that talks with Paris Club creditors are ongoing. Kudrin said Russia’s foreign debt will fall below its hard currency reserves for the first time this year. Foreign debt will fall to about $115.7 billion by the end of the year, while reserves will rise to about $120 billion, he said.

The Financial Times notes that agreement on the repayment could be reached as early as January with about $5 billion – $6 billion of the total going to Germany, German officials said. Germany angered Russia last June when it unveiled plans to repackage $5 billion of that country’s debt in a deal known as Aries. Russia has not issued any debt since 1998 but the German transaction represented, in effect, Russian issuance. Germany promised not to repeat the transaction for six months but this deadline is fast approaching. Aries put Russian bond prices under pressure, increasing borrowing costs for Russian companies, and meant that the country’s debt issuance was no longer under its own control.

ITAR-TASS (Russia) reports Alexei Kudrin said preliminary talks with member states of the Paris Club of creditors have shown that they prefer early debt repayment by „real money.“ „Now we are assessing the requirements of the Russian finance ministry and the governments of Paris Club countries to which we are debtors. They are more interested in an early debt settlement by „real money“ even paid in installments ahead of securitization, the minister said.

Interfax (Russia) adds that on January 1, 2006, the Stabilization Fund’s overall volume will amount to 719 billion rubles. The non-expendable surplus beyond the main volume of 500 billion rubles will amount to 219 billion rubles, or about $7 billion. „We count on it,“ Kudrin said, adding that if next year’s oil prices are higher than expected, the surplus, which could be used for foreign debt repayment ahead of schedule, may exceed $10 billion. „If the oil price changes and rises to $29, $30, $31 per barrel, the Stabilization Fund’s volume for January 1, 2006 will increase, and if we spend all of the surplus above 500 billion rubles for early debt payments, it may amount to $7 billion. In case of higher oil prices, it may exceed $10 billion,“ the minister explained.

In other news, Dow Jones reports Alexei Kudrin was quoted as saying Monday that Iraq will owe Russia between $700 million and $1 billion after the bulk of its debt is written off under a deal with international creditors. Iraq owed Russia about $10.5 billion, Kudrin said at a news conference. President Vladimir Putin said last week that under the deal, Russia was writing off more than 90 percent of the debt it is owed by Iraq. „They will still owe us from $700 to $1 billion, but this debt will be restructured,“ Interfax quoted Kudrin as saying.