A leading Russian economic minister met this week with a team of American public finance executives, hoping to reinvigorate a plan to bring municipal bond finance to the former Soviet Union.

Andrej Shapovaljants, a first deputy minister in Russia's Ministry of Economics, met Tuesday in New York City with officials from the public finance departments at Goldman, Sachs & Co. and Lehman Brothers, as well as an international investment banker at Salomon Brothers, to update them on the status of the project. The minister reiterated his country's intentions of introducing municipal-type securities into the Russian marketplace.

The public finance team has been in place since November 1990, but the region's political and economic upheaval has kept it from making any significant headway.

Shapovaljants told the bankers that earlier plans to use securities resembling municipal bonds would be pursued, but for different facilities than originally proposed. He said the pilot projects would finance a housing development, a sewage system, and an international trade center, not the grain storage facilities and AIDS hospital that had originally been proposed.

The new projects are all planned for Kaliningrad, a region south of Lithuania on the Baltic Sea that Moscow hopes to use as a testing ground for new free-market ideas.

In an interview through a translator after the meetings, Shapovaljants said the idea of using municipal bonds appeals to the Russian leadership because of its potential to provide "off-budget" financing for desperately needed infrastructure.

But some of the issues that must be resolved include how to structure the bonds to appeal to investors and how to secure government guarantees, he said.

"The bankers also raised a number of questions regarding the conditions of our environment for foreign bankers in Russia," Shapovaljants said, including whether accounting norms meet international standards. He said planned reforms should help ease those concerns.

Edward L. Shapoff, a vice president at Goldman Sachs, said he was encouraged by Shapovaljants' "fresh approach" to the project, and his intention to implement public finance "from the bottom up rather than the top down."

Shapoff said redirecting the pilot projects also seemed appropriate. "As we begin modeling a public finance system, I think housing is a good place to start," he said.

EcoLink Inc., a nonprofit company established in 1989 to help the Russians with their public finance goals, heads the team of bankers.

Jeffrey Sachs, EcoLink's president, gave Shapovaljants a whirlwind tour of a few American public finance projects during his two-day visit, including the Triborough Bridge and Battery Park City in New York City.

"We hope eventually in Russia we will move in the direction of reproducing this process of investment," Shapovaljants said. "We sense a mutual benefit for the [government] and for investors."

Sachs said members of the banking team will likely visit Russia sometime in the next two or three months to continue work on the project. Smith Barney, Harris Upham & Co. is also involved in the effort, but public finance officials there were unable to attend this week's meeting.

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