* Amount of aid may be less than reported $23 bln but still large
* Bail-out to add to burden on strained state finances
By Darya Korsunskaya and Jason Bush
MOSCOW, Nov 16 (Reuters) - Russian officials said on Monday that the government will support state bank VEB, confirming reports that it is in financial difficulties and raising questions about the economic implications of the situation.
The newspaper Kommersant reported on Friday that a 1.5 trillion rouble ($22.6 billion) bailout package was under discussion for VEB - five times more than earlier estimates of the amount it needed.
On Monday, senior officials said the support package may be smaller than that. But they did not deny the scale of the bank’s problems.
“The figure may be slightly refined towards a reduction, but as a whole it will be very large,” Economy Minister Alexei Ulyukayev said in comments cited by RIA news agency.
The amount cited by Kommersant would add almost 10 percent to the federal budget, a burden Russia could ill afford when its finances are already severely strained by low international oil prices, a deep economic slump and international sanctions over its actions in Ukraine.
Analysts say many of VEB’s lending decisions reflected political priorities rather than commercial ones, leaving the bank saddled with bad debts.
The bank was heavily involved in financing the 2014 Winter Olympics in Sochi and is also active in financing state-backed projects in troubled sectors such as ship-building, aerospace, defence and agriculture.
In a sign of divisions within the government over how to support VEB, the Vedomosti newspaper reported on Monday that the Finance Ministry was opposed to the idea of recapitalising VEB with free treasury bonds.
A similar scheme, enacted a year ago to help 27 other major banks, added a trillion roubles to the federal budget.
Andrei Belousov, an economic aide to the Kremlin, said on Monday that the government may limit the use of treasury bonds or not use them at all in its plan to help VEB.
But it was not clear what other form the support would take.
Deputy Finance Minister Tatiana Nesterenko said “a political decision” had already been taken to provide support, with different options now under consideration.
She said one option was for the government to acquire some 200 billion roubles of VEB’s foreign debts that fall due next year. She did not say how the purchase would be financed.
VEB is subject to both EU and U.S. sanctions linked to the Ukraine crisis, which restrict VEB’s ability to raise finance abroad. This makes it difficult to pay off international debts without government support.
Ulyukayev said another option under consideration was selling VEB’s stake in Gazprom, the state-owned gas company, Interfax reported.
VEB bought 2.7 percent of Gazprom’s shares in 2010-11 when they were sold by German energy concern E.On. The stake is presently worth around $1.3 billion, a fraction of the amount reportedly needed.
Ulyukayev also said the role of the central bank in overseeing VEB could increase. At present VEB is not monitored by the central bank because, as a state-owned development bank, VEB is not subject to normal banking regulations.
As well as state-backed projects in Russia, VEB has backed foreign projects, notably in Ukraine where it lent $8 billion to enable Russian investors to buy steel plants in the Donbass region of eastern Ukraine, now devastated by war. ($1 = 66.4770 roubles) (Editing by Hugh Lawson)