Russia Offers Up to $20 Billion to Help Shore Up Euro

Speaking after meeting with E.U. leaders in Brussels, the Russian president, Dmitri A. Medvedev, said his country was “interested in the European Union’s preservation as a dynamic economic and political force” and would consider assistance via the I.M.F.

Though Russian leaders and officials faced some criticism for the conduct of recent elections, they arrived at the meeting in a strong position, knowing that Europe was seeking help from Moscow as well as courting other countries, like China and Brazil.

Mr. Medvedev’s economic aide, Arkady V. Dvorkovich, said Russia would be ready immediately to allow the I.M.F. to keep $10 billion from a commitment made in 2009 that, he said, was due to be reimbursed.

A possible second loan from Russia of up to $10 billion was dependent on clearer plans emerging for the financing of a firewall for still-vulnerable euro zone nations like Italy and Spain, Mr. Dvorkovich added.

“There has been a sort of strategic inversion in relations between Russia and the E.U.,” said Thomas Gomart of the Institute for International Relations in Paris. “In 1998 Russia defaulted and around 14 years later, Russia is in a position to finance Europe. Psychologically that is a very big change.”

Plans to leverage the resources of the euro zone bailout fund, the European Financial Stability Facility, are falling well short of the target of €1 trillion, or $1.3 trillion, set by E.U. leaders. The I.M.F is expected to help make up some of the shortfall, but the fund is still waiting to hear the details of how the euro zone will put together a new contribution of up to €200 billion to the I.M.F.

Another E.U. summit meeting on the crisis has now been tentatively scheduled for the end of January or beginning of February.

Meanwhile, worries are intensifying over the possible loss of France’s top credit rating and the effect this would have on the ability of the bailout fund to protect Italy and Spain in the event of further debt problems.

European officials insist that the plans to leverage the E.F.S.F would survive a French downgrade or even a downgrade of all the remaining triple-A-rated members of the euro zone.

But the tension showed in comments by the governor of the French central bank published Thursday, calling debt-rating companies “incomprehensible and irrational” and suggesting that Britain should be next in their sights.

“A downgrade doesn’t strike me as justified based on economic fundamentals,” Christian Noyer told Le Télégramme, a newspaper based in Brittany, according to Bloomberg News. “Or if it is, they should start by downgrading the U.K., which has a bigger deficit, as much debt, more inflation, weaker growth and where bank lending is collapsing.”

Russian officials believe that more detail is needed on the leverage plans to stabilize anxious financial markets. “What we would like to understand is what is the gap and how they are going to collect the whole amount,” Mr. Dvorkovich said. “What we need to do is make markets believe.”

Russia accepts that, with strong economic ties to Europe as an energy exporter and large holdings of euros, it would lose from a deepening economic crisis in its largest market.

The European Union sent €87 billion of exports to Russia in 2010 and imported €158 billion, mainly in natural resources. The summit meeting Thursday occurred ahead of an agreement, expected Friday, on Russia’s membership of the World Trade Organization, a move intended to expand trade opportunities.

“Forty-one percent of exchange reserves of Russia are in euros or euro-denominated securities,” Mr. Medvedev said, adding that, ultimately, “only Europe can help Europe.”

Mr. Medvedev and the Russian foreign minister, Sergey V. Lavrov, met Thursday with the president of the European Council, Herman Van Rompuy; the president of the European Commission, José Manuel Barroso; and the E.U. foreign policy chief, Catherine Ashton.

The two parties agreed on a plan of cooperation on issues, like security and biometric passports, intended as a step toward a visa-free regime for travelers.

Though Mr. Van Rompuy referred to worries about the fairness of recent elections to the Russian Duma, he avoided overly critical comments.

Less measured criticism from European Parliamentarians who called for a re-run of the Duma elections were dismissed on Twitter by Russia’s ambassador to NATO, Dmitri Rogozin. “In a few days they will be coming back to us as if nothing happened,” he said.

Article source: http://www.nytimes.com/2011/12/16/business/global/russia-offers-up-to-20-billion-to-help-shore-up-euro.html?partner=rss&emc=rss