Vnesheconombank Chairman Vladimir Dmitriev’s Interview to the TV Channel Russia 24

Correspondent: Hello, Vladimir Alexandrovich. Let me start with congratulating you here in Bahrain on your Bank’s anniversary. The Bank for Development is going to be 90 years old on December 16.

Vladimir Dmitriev: Thank you.

Correspondent: In general, they call Bahrain a sort of Arab Switzerland where talks have been underway for several days about all events in the Persian Gulf. What sort of talks are you holding here?

Vladimir Dmitriev: I’m here in two capacities – first,as the Head of the Bank for Development. In this respect, we have been building up for a long time close constructive relations with Bahrain, its financing, economic institutions and business communities and second,I’m also here as the co-chairman of the Russian part of the Russian-Bahrain Business Council. In this respect, we have already done a lot but there is more to be done in the future. Especially, given that the management of the Bahrain part of the Business Council has changed. The management and the composition of the Business Council have been augmented and this encourages us to expand our bilateral cooperation in the interests of both countries.

Correspondent: What are the practical results of this cooperation? Have you signed any agreements?

Vladimir Dmitriev: I don’t know anything about agreements that might be signed in so far as it relates to Russian business. We discussed various sectors that are of interest for potential investors and Bahrain. They include medicine, pharmaceutics, IT-technologies, logistics, transport, projects on the development of agriculture and food industry. Bahrain and other Gulf countries provide themselves with foodstuffs through imports. They import foodstuffs from Australia and New Zealand but it might be more profitable for them to import food products from Russia. There is a great potential here for developing gas sector. Bahrain is not a gas producer so it uses its geographical position in some sense as a HUB. Bahrain hopes to cooperate with Gazprom and other institutions to provide itself and other countries with this raw material.

Correspondent: And can you carry out financial monitoring of this project.

Vladimir Dmitriev: Of course, we can. We hope that supplies of products with high added value from Russia can and must be financially supported by Vnesheconombank which also gives high priority to supporting Russian industrial exports of agricultural products. We have a great potential for this.

Correspondent: Let’s talk about supporting Russian industry and agriculture. Recently theRussian Government has made a decision to expand VEB’s powers and entitle it to buy foreign assets for Russian buyers. What assets do they mean and why did they make this decision.

Vladimir Dmitriev:Essentially, it just formalizes Vnesheconombank status as a development institution which is designed to support not only Russian industrial exports but also Russian investments abroad. To this end, the Export Insurance Agency of Russia was established. So, we have created a pretty efficient institution to support Russian businessmen who are ready to invest abroad. Here I mean above all sectors related to a transfer of technology, these are advanced production facilities designed to enhance positions of Russian medium-sized enterprises both abroad and in our country. Unfortunately, we don’t see any mass demand for financial instruments in innovation sectors inside the country. Maybe it exists but unfortunately we can’t ensure interaction between financial institutions and medium-sized enterprises because risks of purchasing high technology companies abroad are high.

Correspondent: In fact, are you going to buy high technology companies in the West? Are they going to sell you such companies? We all remember that several years ago, Sberbank and Avtovaz tried to buy Opel and they failed to do it at that time. The current political situation is more complicated. Will you be able to buy these assets? There are many examples when Russian business owns or co-owns advanced processing facilities. They are associated with activities of KAMAZ and “Rostechnologies” and there are also examples whenRussian companies become firmly established on their own or with Vnesheconombank’s assistance in foreign markets as for example a company which is a leader in software supercomputer manufacturing, namely, T-Platforms Company where Vnesheconombank is a shareholderwith a blocking stake. The company is operating successfully not in our country but also abroad, specifically in Germany. Therefore, in the current situation we hope that our potential for supporting Russian investments abroad will be needed.

Correspondent: Not long agoVnesheconombank filed a lawsuit with the Court of Justice of the EuropeanUnion in opposition to the sanctions. Is the litigation going ahead?

Vladimir Dmitriev: It’s going aheadas we expected under the procedures typical of European legal institutes.

Correspondent:It’s a politically correct answer.And what’s going in actual fact?

Vladimir Dmitriev: It’s an answer in line with the reality. In actual fact,we do not expect any speedy solutions. We are not the only ones, you know that other Russian banks and companies filed similar lawsuits. We are on equal footing and we are coordinating our moves to the extent we can but we can see that a decision-making process is rather lengthy. We know how a legal system works including abroad especially with respect to countries that imposed sanctions on us and companies that were hit by our Western-European partners’ sanctions.

Correspondent: This means that politics influences not only economy but also court.

Vladimir Dmitriev: So far, wehaven’t seen any deliberate sabotage but we are also aware that our colleagues are not going to step up their efforts.

Correspondent: The Bank was denied access to foreign currency because of the sanctions.

Vladimir Dmitriev: We are being funded and make payments within a period of up to 30 days.

Correspondent: Nevertheless,sanctions cause problems. Projects are often funded in dollars and euros.What back ways are you looking for?The word is that you can find back ways with the help of Asian banks?

Vladimir Dmitriev:Nobody is going to look for back ways. We traditionally cooperate closely with our partners from South-East Asia – in particular with Chinese banks. Our main partner is the China Development Bank. We also cooperate with China’s Eximbank and a number of other financing institutions. Our Bank has become a full member in the AssociationofDevelopment Financing Institutions inAsiaand thePacific, an annual session of which was held for the first time this year in Moscow. But it goes without saying that having come up against limited access to capital markets in Europe and the United States we are cooperating with our Asian partner more actively.

Correspondent: Will you be able to raise dollar liquidity?

Vladimir Dmitriev: We are already doing this. Here we do not deal with pure funding but with tied loans. Recently we have raised a credit worth several billion dollars from China’s Eximbank. The loan is tied to supplies of Chinese equipment and it can compete with equipment of European countries.

Correspondent: Aren’t you talking about supplies of component parts for the Superjet100.

Vladimir Dmitriev: No, I’m talking about supplies of Chinese high technology products. But on the other hand the SukhoiSuperjet 100 is also being sold abroad. As many as 12 planes are already flying in Mexico. There is a contract for another 10 aircraft. Our Mexican partners are delighted by this aircraft and it is flying not only in Mexico but also in Latin American countries and even in the US. We can see that localpartners and airlines show interest in this airliner because the need for this aircraft is great. And we are proud of this because we managed to use all mechanisms for exports comprehensive support including VEB-Leasing and EXIAR. Here we rely on our cooperation with state insurance agencies from France and Italy.

Correspondent: So, they want to sell their own?

Vladimir Dmitriev: To some extent. You are right saying “their own” because 60% of this aircraft content comes from foreign partners. Our Italian and French partners participated in manufacturing engines and avionics. Airliners intended for Mexico are assembled in Italy, in Venice. Therefore, despite the sanctions life goes on.

Correspondent: I can’t help asking you about your assets in Ukraine. VEB owns Prominvestbank there. What can you tell me about its future? My understanding is that you’re planning to additionally capitalize it.

Vladimir Dmitriev:We are planning to additionally capitalize it for an amount needed by the bank to comply with regulations of the Ukrainian National Bank. Given an unfavorable situation in Ukraine’s banking sector and liquidity outflow, we also intend to support the bank with liquidity because Prominvestbank is one of the largest creditors of Ukraine’s real economy. I’d like to say that outflow of customers’ funds – funds of both natural and legal entities varies depending on a bank and its involvement in a particular business from half a billion to several billion dollars. Of course, this affects banks’ stability very much.

Moreover, payment discipline in the Ukrainian banking system is extremely low. This year the proportion of credits that are repaid in accordance with original repayment schedules is as little as 20%. You can see that this delivers a heavy blow to stability and financial standing of the banking system. Our Bank is one of the largest and we are determined to provide necessary assistance to Prominvestbank.

Correspondent: This means that you are not going to scale down your business in Ukraine.

Vladimir Dmitriev: This is not our goal.

Correspondent:Vladimir Alexandrovich, thank you very much for your interview.