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UPDATE 2-Russia says Ecuador has asked it for a loan

Published 10/28/2009, 03:23 PM
Updated 10/28/2009, 03:27 PM
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* Ecuador seeking alternative funding after default

* President visiting Russia

* Energy deals, defense to be discussed (Adds analyst comment)

MOSCOW, Oct 28 (Reuters) - Ecuador -- forced to seek alternative financing after defaulting on some of its sovereign bonds last year -- has asked Russia for a loan, Russian Finance Minister Alexei Kudrin told reporters on Wednesday.

Ecuadorean President Rafael Correa is visiting Moscow this week and is due to meet Russian counterpart Dmitry Medvedev and Prime Minister Vladimir Putin on Thursday, with energy and defense likely discussion topics.

Kudrin declined to specify what amount the loan could be for, and said talks on the issue between the two oil producing countries had not yet started.

Ecuador has already signed a $1 billion cash-for-oil deal with China and Correa told Reuters this week that he expected more bilateral deals in the future. [ID:nN27266706]

Russia -- the holder of the world's third largest gold and forex reserves worth some $400 billion -- has attracted many loan requests from crisis-hit countries.

A few, including from other former Soviet Union nations Kyrgyzstan and Armenia, have been granted. Some of the loans were linked to projects involving Russian companies.

But other requests, such as that of Iceland, have been rejected, as the government is reluctant to hand out too much money at a time when it faces at least three more years of budget deficits. [ID:nLE372038]

Correa's visit to Moscow is aimed at strengthening ties in part to enhance his country's defenses [ID:nLR550349]. He is a critic of Washington and an ally of Venezuelan President Hugo Chavez, who is building up his military with Russian weapons.

"Ecuador -- in this post-crisis, post-default environment -- is making the point that there are a lot of sources of funding other than the bond market and multilateral lenders," said Gary Kleiman, head of Washington-based consultancy Kleiman International.

Another possible area of mutual interest is oil. OPEC member Ecuador produces 500,000 barrels per day of crude. Russia, now the world's largest oil producer, pumps 20 times as much.

Ecuador has said it wants to invite Russian companies to extract oil on its territory, and is in talks with several companies including state-owned Zarubezhneft.

(Reporting by Gleb Bryanski; Additional reporting by Hugh Bronstein in Bogota; Writing by Toni Vorobyova; Editing by Kenneth Barry)

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