Russia and its main creditors have reached a deal to reschedule some of the country's massive debt load.

The so-called London Club of creditor banks agreed to effectively wipe out more than half of a $31.8bn debt burden dating back to Soviet times.

The deal was praised by acting Russian president Vladimir Putin.

"The terms are good," Mr Putin said on Russian television. "A write-off of more than a 36 precent, a 30-year rescheduling including a seven-year grace period during which we will effectively pay nothing. Those are really good terms."

It took both sides a final nine hours of talks in Frankfurt to come to an agreement, but negotiations had dragged on ever since Russia devalued its currency in August 1998 and defaulted on debts worth $40bn.

This set off a subsequent spiral of default on around $103bn of outstanding Soviet obligations.

Russia's First Deputy Prime Minister Mikhail Kasyanov said the deal was a major achievement. He said it would put Russia's relations with private sector creditors on a normal footing.

"We're all very satisfied because all the tasks we had before us have been fulfilled," he said. "It is even better than we might have hoped."

Under the deal, the debt will be cut by an average of around 36.5% and repayments will be stretched over 30 years.

The various debt papers will be exchanged for new Russian Eurobonds.

This could allow Russia to borrow on the commercial market again. Moscow officials have hinted that they might try to approach lenders as early as 2001.

The London Club brings together commercial banks that have lent money to Russia.

Governments that have given credits to Russia are organised in the Paris Club.

Deal details

The Eurobonds will have a grace period of seven years and pay an interest rate of 2.2% for the first six months, 2.5% for the next six months and 5% in the years two through seven.

Years eight to maturity would carry a rate of 7.5%.

In addition, $2.8bn of interest due on those debts will be exchanged for a new Russian Federation Eurobond with a final maturity of 10 years and an interest rate of 8.25% per annum, the statement said.