It has renegotiated payments on billions of dollars of debts owed to Western governments, which were originally borrowed during the period before the collapse of communism.

The deal comes after all-night negotiations in Paris, and only covers debt payments falling due in 1999 and 2000.

The plan is to stretch out payment on the $8bn of debt that falls immediately due over the next 15 to20 years.

The radical reduction in payments signals a readiness by Russia's creditors to give its economy some breathing space.

Negotiations on a full restructuring of Soviet-era debt will begin the autumn of 2000, with hopes for "comprehensive solution." But Paris Club Chairman Francis Mayer told journalists this should not include a write-off of Russian debt.

"We need a stable Russia that will stay anchored in the international community and democracy," he added.

The news comes after the International Monetary Fund approved a $4.5bn loan package for Russia after months of hesitation.

The first instalment of that loan will be transferred directly to the IMF itself, as Russia's IMF loans fall due in July and August.

Commercial debt deal next

Russian Finance Minister Mikhail Kasyanov said he was 'fully satisfied' with the outcome of the talks, which meant that the Russian government would not have to modify its budget plans.

But he now faces an even more difficult task of convincing the commercial banks to reschedule their portion of Russia's international debt, with talks starting on Tuesday in Frankfurt. Mr Kasyanov said he hoped that "a reference point" had now been established to guide future talks.

These talks will cover around $32bn of debts, and the Russian government 'could not exclude' debt write-offs as well.