MADRID -- Russia signed a breakthrough agreement with its bank creditors Wednesday, paving the way for a deal to reschedule nearly $25 billion of debt and ending 15 months of deadlock.


The agreement, hammered out on the sidelines of the annual meeting of the International Monetary Fund in Madrid, cleared up outstanding legal issues which had prevented a Russian debt accord from being settled much earlier.


Russia's chief debt negotiator, Deputy Prime Minister Alexander Shokhin, called the deal "an important vote of confidence from the international financial community."


The price of Russian debt on the secondary market shot up on the news. Debt held by Vneshekonombank, the old Soviet foreign trade bank, jumped more than two points to 41 percent of its face value.


"It's very positive. (The price) has got further to go yet," one trader said.


The rescheduling offers Russia's struggling economy a major source of financial relief.


Moscow had assumed responsibility for repaying all debts of the former Soviet Union, which now amount to nearly $90 billion.


The final agreement, expected to be signed as soon as there is formal approval from 600 creditor banks, gives Russia a five-year grace period during which it has to pay back neither interest nor debt principal.


After that it will be given another 10 years to pay off the debt in semi-annual installments.


The framework accord has been ready since last summer, but the two sides have been squabbling ever since over legal issues, mainly the banks' insistence that Russia waive its "sovereign immunity."


That would effectively have given banks the right to seize Russian assets if Moscow did not pay.


Such clauses are common in debt deals with developing nations, but Russia successfully rejected the banks' bid to have it included in its debt agreement, arguing that this was not consistent with Russia's stature as a major world power.


"(The agreement) does not require any waiving of Russian sovereign immunity," Shokhin told journalists at the signing ceremony in the Russian embassy in Madrid.


Christian Vontz, the Deutsche Bank official who chairs an advisory committee representing Russia's 600 bank creditors, said banks were satisfied with the final arrangement.


"The word of Russia is something which will guarantee to us that we will not suffer any loss," he said.


For its part, Russia agreed to pay $500 million by the end of this year, effectively as a down payment.


The sum had been named in a previous accord, but it was never paid as the two sides bickered over legal issues.


Russia also agreed that Vneshekonombank would be the actual debtor responsible for paying back the loans.


The Russian government would guarantee payment.


The banks had not wanted the Russian government itself to be the debtor. "Governments come and go," commented one banker close to the talks.


But Vontz praised Shokhin for having broken the "Gordian Knot" surrounding the elusive debt deal.


He said the agreement would pave the way for more direct investment in Russia, stimulating the Russian economy and speeding Russia's integration into the international financial community.


"This rescheduling is more than just a schedule of repayments, it is accepting the Russian government within the banking and financial institutions and the world community," he said.