Russia tycoons bailout could turn into Kremlin trap

By Dmitry Zhdannikov and Darya Korsunskaya

MOSCOW (Reuters) - Russia has spent $8 billion (4.9 billion pounds) from its foreign exchange reserves to help some of its richest men to refinance foreign debts and the names of the recipients give a clue to the Kremlin's favourites.

But the reserves are not being sacrificed for free.

The billionaires have transferred stakes in some of their most prized firms from Western banks to the Russian state as collateral, handing the Kremlin the means to grab the assets should the oligarchs fail to repay loans or fall out of favour.

"The turmoil provides an opportune moment for the state to get a little closer to the equity that was sold in the 1990s," said Michael Kavanagh, metals analyst at UralSib.

State-owned Development Bank, also known as VEB, has been entrusted by the Kremlin to distribute a $50 billion rescue package, helping Russian companies to refinance a total of $120 billion of Western loans by the end of 2009.

The first round of payouts has already been approved.

VEB disbursed $2 billion to Mikhail Fridman's Alfa Group to help it pay back a loan to Deutsche Bank and rescue Alfa's 44 percent stake in Russia's No. 2 mobile phone firm, Vimpelcom, which was used as collateral with the bank.

Fridman joined Oleg Deripaska, Russia's richest man, who this week became the first billionaire to get state support in refinancing his foreign debts.