MercoPress. South Atlantic News Agency

Russian and eBay solutions for bankrupt Iceland

In a surprise move, which reverberated across the international community, Russia issued a four billion Euro state loan to Iceland. The statement on Russia's central bank website reads that the loan maturing in three-four years and an interest rate as low as 30-50 basis points above Libor has been given the green light by Prime Minister Vladimir Putin.

The news comes as the Iceland government has been rocked by prospects of looming state bankruptcy, with its main banks nationalized. The Kremlin, which has opened its international reserves to bail out the Russian banking system, energy corporations, --and was also forced to suspend operations in stock markets--, seems to not have forgotten the strategic location of bankrupt Iceland. Russia's Finance ministry originally denied the news but hours later Russian Finance minister Alexei Kudrin admitted Russia had indeed received a loan request, had been reviewing it and had been positive about it because Iceland was a country abiding by strict fiscal discipline. It was precisely lax regulations which allowed the Iceland banking system to overextend globally with current liabilities several times the island's GDP. A team of IMF experts is currently in Reykjavik assessing the magnitude of the financial disaster. In the meantime, on Friday the entire country and all its assets were jokingly put up for grabs on the Internet auction site with bidding starting at 99 pence. The ad read, quote, "Iceland will provide the winning bidder with a habitable environment, Icelandic Horses and admittedly a somewhat sketchy financial situation." By mid-morning the top bid surpassed 17-million dollars. There were 26 anonymous bidders and 84 bids posted for the cash-strapped Arctic wonderland. Bidders on the site posted questions like: "Do you offer volcano and earthquake insurance?" "Is it possible that my payment will be frozen?" and "Will you accept C.O.D. as a form of payment?" Russia also announced it would issue cheap loans worth 950 billion roubles (36.7 billion US dollars) to its ailing state financial institutions. The money will be disbursed within a five-year timeframe and the main beneficiaries will be Russia's main banks: Sberbank (500 billion roubles) and Vneshtorgbank (200 billion roubles). The bailout, which comes on top of a 180 billion roubles governmental rescue plan, was a measure agreed at a meeting between the Russian government and the country's leading bankers. Russia's finance minister also spelled intentions to request parliamentary approval to open the state gold and foreign currency reserves to implement a so-called preventive intervention and avert a crisis scenario. In September, the Russian reserves were down 25.6 billion to 556 billion US dollars. In the meantime, Gazprom executive Alexander Medvedev urged OPEC, the US and Western European governments to stem the slide of oil prices or else Russian oil companies would suffer a huge blow.