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Politics aside, western financiers still want to do business with Russia

Published time: April 10, 2014 10:47
Edited time: May 30, 2014 08:51
Andrey Kostin, President and Chairman of the Management Board, Member of the Supervisory Council, VTB Bank (RIA Novosti / Mihail Metzel)

Andrey Kostin, President and Chairman of the Management Board, Member of the Supervisory Council, VTB Bank (RIA Novosti / Mihail Metzel)

Western banks in the US and EU still want to do business with Russia’s second biggest bank, VTB, but tension over Ukraine is stonewalling those eager to work with the bank, according to its head, Andrey Kostin.

“I can say one thing- that in the last few weeks I have met several bankers from the US and EU that have said they want to continue to work with us,” Kostin, the bank's President and Board Chairman, said in an interview with Izvestia.

“They flew in especially to confirm these intentions, so I would say they are willing to cooperate, that hasn’t changed. It’s just that our partners can’t loudly publicize their willingness, because they feel pressured,” the VTB head said.

The EU and US froze assets and placed visa bans on senior Russian officials as well as Russia’s fifteenth largest lender, Bank Rossiya, targeted because it is believed to be the bank of many senior Russian officials.

US Secretary of State John Kerry has spoken of more sanctions against Russia, as pro-Russian sentiment in the eastern cities of Kharkov, Donetsk, and Luhansk heat up.

“Business is a factor that is preventing US and EU authorities from moving further down the list of sanctions because businessmen are pragmatic people,” Kostin said.

However, sanctions have made international investors uneasy, and in the first three months of 2014, more than $63 billion in capital has flowed out, the same amount that t left during the whole of 2013, according to Central Bank data.

Capital outflow is a result of Ukraine tensions which have coincided with a weakening ruble, which has lost more than 10 percent of its value since the beginning of year against the dollar.

Sanctions were a response to Moscow’s acceptance of Crimea, a former Ukrainian region, as a new part of Russia. Action in Crimea has worsened market conditions for Russia’s second-largest state bank, as investors worry about more sanctions from the US and EU.

VTB appears to be moving towards more international ruble payments. Kostin has urged more ruble-based payments with trading partners in China, as well as Europe. The move would make the bank less vulnerable to any sanctions from the US or EU.

VTB head office in Moscow (RIA Novosti / Aleksandr Utkin)

VTB opened its doors in 1990 under the name Russia’s Foreign Trade Bank and was positioned to be a bridge between the Russian market and foreign investors.

Political motivations

Western financiers are facing pressure not to visit the St. Petersburg Economic Forum in May. The eighteenth annual forum draws over 4,000 investors, economic experts, and policy makers from around the world and is one of Russia’s most important economic events of the year.

Kostin believes VTB’s London subsidiary may be experiencing unusual treatment from the Bank of England.

"In the last weeks, we have experienced very strong pressure from the Bank of England towards our bank VTB Capital Plc in London," said Kostin in the same Izvestia interview.

"They are trying to make demands which are incompatible with regular supervisory practices," Kostin said. "It seems to me that they (the measures) have a more political motive."

Mr. Siluanov goes to Washington

Russian Finance Minister Anton Siluanov has been in Washington DC this week for talks on the Foreign Account Tax Compliance Act (FATCA) which will require foreign banks to share information on American clients to the US Internal Revenue Service (IRS) to aid its crackdown on offshore tax evasion.

If a bank doesn’t join the system by July 1 2014, undeclared American accounts could be subject to a 30 percent tax.
Disagreement over politics in Ukraine could curb these talks, as last week the US put negotiations with Russia on hold.

To avoid the costly penalty, Russia's Finance Ministry is currently drawing up its legislation that'll allow Russian banks give the information to foreign tax tax authorities.

FATСA members will include tax haven destinations like Bermuda, the Cayman Islands, Ireland, Luxembourg, and Switzerland, as well as several other European countries like the UK and Sweden as well as neighboring Canada and Mexico.

Comments (6)


Preterist1951 13.04.2014 01:42

From the ONCE great USA (until the Ashkenazi/Khazar-Bol shevik-Communist Bankers took control of and now own it): Make a clean break from the Ashkenazi/Khazar-Bol shevik-Communist Bankers that destroyed our country and stay as far away from them as possible.


Regula 12.04.2014 05:21

If countries stood together in refusing the US demands, the US couldn't be as overbearing as it is. The US has no business imposing its regulations/laws on other countries' banks. The Swiss banks resolved it by throwing out all American domicile clients.

If the US citizens don't pay their taxes, that really isn't the fault of a foreign bank. Maybe if the US decreed an amnesty for hidden funds every 20 years, people would move some of the money back to the US or at least declare it and pay their taxes. But the absurdly high penalties send everybody in that situation deeper into hiding. It's counterproductive.


PR101 10.04.2014 23:52

Well, Banks and other businesses must follow their governments. I know Russians understand this.

View all comments (6)
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