Mark Mobius, Franklin Templeton's emerging markets manager, could soon find himself again defending his swashbuckling investment style if Russia defaults on its dollar bonds, as a growing number of commentators expect.

The Mobius-managed, closed-end

Templeton Russia Fund

(TRF)

substantially increased its exposure to Russian eurobonds -- hard-currency-denominated, offshore fixed-income instruments -- in the fourth quarter of last year.

The Russian bond allocation of the

New York Stock Exchange

-listed fund soared to 12% in December 1998 from 2% in September. Templeton did not make more recent portfolio data available and Mobius did not respond to calls seeking comment.

The eurobonds currently trade at between 24 cents and 32 cents on the dollar, depending on their maturities. In a January

interview, Mobius told

TheStreet.com

he believed the Russian government would keep current on these bonds because it realized the need to maintain the favor of eurobond investors for future borrowing purposes.

Mobius arrived at this optimistic conclusion even though the government defaulted on its ruble-denominated domestic bonds last August.

This year, however, Russia's relations with the

International Monetary Fund

, which has helped prop up the government's finances the Soviet regime collapsed in 1991, have failed to improve since the devaluation.

As a result, the ruling Primakov administration may not receive the hard currency loans from the IMF that it needs to make the eurobond payments.

"There is an almost guaranteed default on external debt, including eurobonds," wrote Boris Nemtsov, a former Russian deputy prime minister, in

CreditWeek

, published this week by

Standard & Poor's

, a ratings agency.

A default on the eurobonds could cause their prices to plummet to below 10 cents on the dollar, where other Russian offshore bonds trade. Russia also has recently defaulted on hard-currency loans taken out during the Soviet era, dubbed the London Club and Paris Club debt.

The

Group of Seven

, an organization that coordinates initiatives by the finance ministries of the world's seven richest nations, is handling this default. The G7 could be contemplating a debt workout that involves Russia rescheduling its eurobonds along with the Paris and London Club obligations, says Andrew Kenningham, East Europe economist at

Merrill Lynch

in London. Rescheduling is a euphemism for "default."

If Russia does default on the eurobonds, it would not be the first time Mobius' overoptimism about an emerging market got him into trouble. After Thailand devalued the baht in 1997, he piled money into the country's equity market, which kept on falling after Mobius had made his investments. Shareholders of the

Templeton Vietnam Fund

(TVF)

are

suing Mobius and Templeton for this fund's Thai investments.

Templeton Russia's premium -- the difference between the fund's share price and its underlying assets -- has shrunk to around 20% from a 52-week high of around 60%, partly because of this bond position, says Paul Mazzilli, a country funds analyst at

Morgan Stanley Dean Witter

, who has an "underperform" rating on the fund.

The fund's cash weighting went down to 15.3% at the end of December from 56% three months earlier. Most of the cash went into equities. The fund's weighting in equities rose to 73% from 42% over the same time period.

Mazzilli says that Mobius' eurobonds, despite the uncertainty surrounding their future repayment, may actually have performed better than some Russian equities. "In general Mobius is a good manager," he says. "As difficult as the bond position looks, he may have been more hurt if he had been all in equities."

Templeton Russia's share price has slid 70.5% over the past 12 months, compared with a 76% decline for the

RTS Index

, a benchmark for Russian equities.