Russia should use windfall oil revenues to fund early repayment of foreign debts, especially some of the $46 billion it owes to the Paris Club, Finance Minister Alexei Kudrin said on Wednesday.
Russia, whose debts total nearly $120 billion, is stashing away receipts from unexpectedly high prices for its key export, oil, into a special "rainy-day" fund.
"For instance, early repayment of $30 billion of debt allows us to free about $2 billion or 60 billion roubles (a year). This is an at least 15 percent increase in (civil service) wages," Kudrin told reporters.
Russia's debt currently costs $7 billion to $9 billion a year to service.
"Using revenues, accumulated from high oil prices, to pay off debt and free up funds to service debts, is the most efficient investment of those revenues," Kudrin added.
By law, the government can only raid its savings for purposes other than plugging budget deficits when they top 500 billion roubles ($17 billion) - which they are forecast to do well before the end of the year.
Kudrin has said Russia's oil money came as if from heaven and spending it would usher in an era of hyperinflation, but other ministries have been eyeing it hungrily.
Kudrin, seen as Russia's most influential liberal reformer, also tackled the suggestion that Germany could be poised to issue another tranche of notes backed by Russia's Paris Club debt.
"In connection to reports that Germany is again prepared to issue Eurobonds, linked to Russian debt to Germany, we hope Germany will not now do this," he said.
The German finance ministry on Tuesday denied a report that it planned to sell more of its holdings of Russian debt next year. It said Germany had the option to sell Russian debt, but would have to hold bilateral talks with Russia before doing so.
Germany - Russia's biggest sovereign creditor - issued 5 billion euros ($6 billion) in "Aries" notes earlier this year, which were greeted warmly by investors.
Moscow response was frosty. It said it had not been told the issue would be so big and complained corporate borrowers might be crowded out of the market.
To head off any similar issues, the Russian Finance ministry has floated the idea of repaying Paris Club debt or swapping it with a Eurobond issue.
Kudrin said that over the next two months Russia would continue discussions with the Paris Club, but said it was too early to talk about concrete proposals.
"In this way we would gain control over the debts and avoid the situation where other countries manage Russian debt, and we would have more serious control over yields on the market," he said.