VEB sees RUSAL IPO a success, plays down risks

* Will have 20 bln rbls spare cash for projects like RUSAL * Sees positive dynamics for markets, RUSAL itself * Says Cherney not mentioned among risks By Dmitry Zhdannikov MOSCOW, Dec 7 (Reuters) - Russian state banking agent VEB could have up to $670 million to spend on aluminium company UC RUSAL's share offering, without spooking the market by abruptly selling its big share portfolio, its head said on Monday. Vladimir Dmitriyev also said there were no major risks around the IPO application, which is currently being assessed by the Hong Kong stock exchange. Indebted Russian tycoon Oleg Deripaska, who controls RUSAL, is aiming to float up to 10 percent of the company and raise up to $2 billion, but some commentators say legal risks, such as a suit brought by Russian businessman Michael Cherney against Deripaska, could complicate the application. VEB, which threw a lifeline to RUSAL last year when it lent the company $4.5 billion to help avoid a default on Western loans, is preparing to buy up to 3 percent during the IPO, government sources have told Reuters. "We have taken the decision (to participate in the IPO) deliberately, based on expectations the floating will be successful," VEB's head, Vladimir Dmitriyev, told reporters. "It is based on the quite positive dynamic of the company itself and the market dynamics. Therefore we didn't have concerns." As aluminium prices have started to recover from their lows, and the state continues to support Deripaska's empire, the risk focus has shifted to the Cherney suit. Cherney is suing Deripaska for 2 billion pounds in damages in the UK High Court -- an action that the judge has described as having a "reasonable prospect of success". Dmitriyev said the Cherney case had not been an issue during discussions at VEB. "This name was not mentioned," said Dmitriyev. When pressed whether any of VEB's risk units mentioned the case as a potential risk, he replied: "There was no word on it." MARKET WON'T NOTICE VEB has invested 175 billion roubles from the state National Wealth Fund into Russian blue chips since the end of 2008 to support the stock market, and has earned 60 percent since then as most stocks have soared in value. Dmitriyev said VEB would generate 100 billion roubles ($3.4 billion) in profits on selling its portfolio, but declined to give a time for the sale. "We will exit the portfolio in such a way that you won't notice it. And the market won't either," said Dmitriyev. Of the 100 billion rouble profit, the bank would channel 50 billion to help the government bring down interest on mortgage loans and 30 billion to create a state export financing insurer. This would leave VEB with around 20 billion roubles ($675 million) in spare cash that could be invested in other projects, including RUSAL shares, said Dmitriyev. VEB would not have to sell blue chips immediately if it wanted to buy into RUSAL, he added. "We have enough of our own resources right now." Dmitriyev also said he would welcome the introduction of tougher rules on big banks' external borrowings.