Bankers and investors are optimistic that ongoing discussions between the Russian government and the London Club of private creditors will finally yield a resolution on the $32 billion Russia owes the group.

As negotiators met in Frankfurt last week, traders sent prices for the London Club debt, which is traded on international markets, up 10 percent to 15 percent, as demand outpaced supply by about 20 percent, according to Ilona Kloupte, director of fixed income sales at Alfa Bank.

"Everybody is expecting closure," Kloupte said. "Everybody is expecting to see an end, not necessarily a happy end, but an end. Any kind of end is positive."

Disappointing some, there was no resolution by the end of the week, after four days of talks, and negotiations are scheduled to resume Nov. 24.

"Obviously, it's complicated," said Detlef Rahmsdorf, spokesman for Deutsche Bank, which chairs the London Group and hosted the talks. "There is never a precise schedule."

That led to some nervousness, pushing prices slightly below the week's highs, but the optimism remained, Kloupte said.

Finance Minister Mikhail Kasyanov, who led the Russian delegation in Frankfurt, told Bloomberg News after talks Thursday that the sides "stand a good chance" of reaching an agreement by the end of the year, Interfax reported. "The parties succeeded in getting a rapprochement of their positions," he said.

Kasyanov went into the negotiations extremely optimistic, telling journalists Monday in Moscow that he believed a resolution could be reached quickly. He carried to Frankfurt the government's proposal: to write off 40 percent of the debt altogether, and in return to convert the remainder into Eurobonds with a government guarantee.

Observers in Moscow, meanwhile, believed the proposal was doomed to failure from the start.

"Kasyanov proposed writing off 40 percent," Mikhail Zadornov, former finance minister and former presidential envoy to international financial organizations, told The Russia Journal. "In order to reach an agreement with the creditors, he will likely have to take a step forward, which means a write-off not of 40 percent, but of 30 percent to 35 percent. And that's already too little."

From a financial perspective, Zadornov said, Russia needs to write off at least 50 percent of the London Club debt and 50 percent of what it owes to the Paris Club of creditor governments. In all, Russia is trying to find a way out of $150 billion in debts.

As early as Wednesday, the second day of talks, all was not well. In a report carried by the daily Kommersant on Thursday, Russian negotiator and Vnesheconombank CEO Andrei Kostin said the foreign banks were unwilling to accept a 40 percent write-off. They were, however, ready to extend the repayment period for the debt to 25 to 30 years, Kommersant wrote.

But at the end of the day, the London Club delegates asked the Russians to stay.

Some observers, meanwhile, believe that the talks are being held up indirectly by Russia's dilemma over OVVZ-3 or MinFin-3 bonds, hard-currency bonds bought by foreign and Russian companies within the Russian market but not covered in London Club negotiations.

"They're related," said a source until recently involved in negotiations who declined to be identified. "If Russia does a deal with the London Club, it has to do a deal here as well. But it's a different legal situation."

In fact, the source said, in his experience OVVZs never came up in London Club discussions.

But observers argue that the government will come under pressure to give OVVZ holders similar terms to what the London Club gets. And Kasyanov had explicitly linked the two, publicly promising to sign an OVVZ-3 agreement most likely Nov. 19, upon what he had hoped would be a successful return from Frankfurt.

(Staff writer Anna Yartseva contributed to this report.)