A Briefing by V.A. Dmitriev on Sanctions Imposed by the US Administrationagainst Russian Banks and Companies

Question:Taking into account that fundraising on international capital markets used to be one of main sources of funding VEB activity, how are you going to replace these funds in the current situation and what sort of support are you going to get from the state?

Dmitriev: I’m convinced that in the current situation the state is playing and will play a key role in supporting the banking sector and the banks hit by the sanctions. A Central Bank senior employee has mentioned it today and the Russian Prime Minister spoke about it too and we are feeling this support. This support is as important for us as it has ever been – although since last year,we have been discussing with the Government measures to support VEB for us to pursue the strategy approved by VEB’s Supervisory Board.

But I’d like to stress it once more that in the current situation these measures are even more important. In this respect, mechanisms of the Finance Ministry, the Central Bank and refinancing as well as other ways of supporting Vnesheconombank’s active operationsare to be set into motion.

Of course, we can’t speak without regret about sanctions imposed by the American Administration, they affect both us and our subsidiaries, which include commercial banks. When we are talking about providing support for the banking system and banks hit by sanctions, we naturally mean not only Vnesheconombank but also its subsidiary institutions. The state has sufficient resources to ensure uninterrupted operation of these banks, the more so, the banks that work with private persons, depositors as well as corporate customers. Luckily, we can see that our employees are well balanced despite the fact that they are well informed and that is why there is no commotion in our subsidiary banks – in Svyaz-Bank and GLOBEX BANK, they are operating in a normal mode.

We are of course monitoring the situation but I’d like to call private persons and major customers working with these banks for calm and I also call on them to view the situation soberly, the more so, (I have to touch the wood) sanctions are limited and they are designed to significantly reduce Vnesheconombank’s and its subsidiary institutions’ access to the American borrowing market.

Question: Could you tell us in more detail what specific mechanism will be set into motion for the state to provide support?

Dmitriev: We are considering various options. The Central Bank has already developed methods to support the banking system including long-term credits with a view to their potential extension. I mean credits that will be secured by government guarantees. The system of refinancing is now operating efficiently and we are working together with the Central Bank. I believe that the volume of these transactions will be expanded. The most important thing for us is the state’s support for ensuring funding. At the same time, there are also other support measures. We have an impression that next year a mechanism for redeeming bonds including VEB’s bonds by non-government pension funds will be launched – this is a significant source of long-term money.

We are talking with the Finance Ministry about Vnesheconombank’s activity in the future as a state managing company – we are none the less responsible for managing funds worth 1 trillion 800 billion rubles, half of which are placed in government bonds. These are serious resources for us to think of how we can use them in the interests of the Russian economyю

It goes without saying that we (I mean Vnesheconombank) are drawing conclusions for ourselves from the current situation in which we were involved by the American Administration. It is obvious that the sanctions imposed by it are above all designed to damage our economy. There is no doubt that we are viewed by the American Administration as a serious instrument in accomplishing major objectives. Both American and European measures designed to limit our and Gazprom’s access to capital are of course damaging not only big business we are funding but also regional banks that we are funding through SME Bank ( they are working in their turn with small and medium-sized enterprises; the sanctions also damage our funds created together with foreign partners to provide capital support for our small and medium-sized enterprises.

If all this activity is scaled down, it is sure to narrow the market for funding small and medium-sized enterprises as well as opportunities for forming middle class and ensuring social stability.

My conversations with the Prime Minister and members of VEB’s Supervisory Board today show that we deplore the sanctions but we’ll fulfill all our obligations to small and medium-sized enterprises and regional banks ( not to mention major customers we are funding). No sanctionswill prevent us from doing it - their authors won’t live that long.

Question: Are you going to reconsider the strategy of the Bank for Development in connection with the sanctions?

Dmitriev: We have developed several scenarios of strategies. As far as our lending to the real economy is concerned, we’ll now rely on a conservative approach which will just mean a selective choice of our potential borrowers. We’ll give high priority to landmark, serious projects and refuse projects that could be funded by commercial banks.

Question: Are you going to increase pressure on VEBs debtors specifically those who received credits for the construction of Olympic facilities?

Dmitriev: The Government decision remains unchanged - a moratorium was imposed and it will be in effect until the year 2015. Now we are restructuring our borrowers’ debts, that is, executing judicial documents. By the way, we have discussed this issue at our today’s meeting of VEB’s Supervisory Board. We haven’t discussed and, the more so, made any other decisions.

Question: It turns out that the moratorium won’t be abolished?

Dmitriev: The moratorium won’t be abolished, the borrowers will work in a normal mode. Meanwhile, we’ll monitor their facilities’ conditions, their business and financial performance and consider prospects for making thesefacilities pay back or other scenarios that at the worst will provide for the state’s measures to support either borrowers or Vnesheconombank itself.

Question: Did you take measures to offset sanctions and did you consider the possible ways the situation could develop?

Dmitriev: Yes, we did. If you want peace, prepare for a war.

Question: Are you going to change volumes of foreign borrowings?

Dmitriev: We were forced to make changes, so we’ll substitute foreign borrowings with domestic ones.

Question: Do you know potential volumes of your borrowings?

Dmitriev: You know that volumes of our borrowings depend on our borrowers’ needs. I would also like to say that we’llreview our credit policy.