UPDATE 1-Russian railway eyes $7 bln in bonds by 2010

(Adds details, background)

MOSCOW, Feb 18 (Reuters) - Russian railway said on Monday the government had allowed it to raise up to $7 billion via eurobonds by 2010, only a few weeks after the cabinet decided against caps on foreign borrowings despite high inflation.

Russian inflation stood at 11.9 percent last year, exceeding the target of 8 percent by a wide margin, as government officials blamed global trends, high state spending and record capital inflows, including large borrowings by state corporates.

Prime Minister Viktor Zubkov last month called on the government to find urgent measures to rein in inflation, but the cabinet failed to agree an anti-inflation plan as the Finance Ministry rejected radical steps such as caps on borrowings.

Borrowings of state corporates soared by 64 percent last year to $73.5 billion mainly on the back of large fund raising by state gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research) and state oil major Rosneft (ROSN.MM: Quote, Profile, Research).

If the state-owned railway monopoly, also known as RZhD, places all of $7 billion in bonds, it would become one of Russia's largest borrowers to rival Gazprom (GAZP.MM: Quote, Profile, Research), Rosneft (ROSN.MM: Quote, Profile, Research) and banks Gazprombank and VTB (VTBRq.L: Quote, Profile, Research).

RZhD said in a statement on Monday it might issue up to $1.5 billion in Eurobonds this year and file for permission to issue a total of 80 billion roubles ($3.26 billion) via rouble bonds in 2008-2009 with maturity of three to ten years.

The company currently has a total of 47 billion roubles of outstanding local bond issues <0#RUEUROSPZ=> <0#RUEUROSAO=>.

The firm said the Eurobonds will be part of its three-year borrowing programme for 325 billion roubles ($13.23 billion) that was approved by its board of directors last Friday.