Vnesheconombank Chairman Vladimir Dmitriev’s interview to TV Channel Russia 24

TV Channel Russia 24, INTERVIEW, 22.01.2016, 13:04

HOST: Now, we are getting in touch with Switzerland. Today, is a day of Russia at the Davos Economic Forum, delegates are discussing the situation in our economy and share their visions of its development. My colleague Nailya Asker-Zade is in direct contact with our studio. Her guest today is Vnesheconombank’s Chairman who is also at the Forum. Hello, it’s time for you to speak.

Host Nailya Asker-Zade

HOST: Good afternoon Ekaterina. Our guest today is Vnesheconombank’s Chairman Vladimir Dmitriev. Vladimir Alexandrovcich good afternoon.

Vladimir DMITRIEV, Vnesheconombank’s Chairman: Good afternoon.

HOST: Let’s first of all talk about the Davos Forum’s agenda, what themes are being discussed on the sidelines, you held meetings with your foreign partners, what are they worried about, what are they interested in and do they express any interest in Russia?

Vladimir DMITRIEV: As usual, the Davos Forum’s agenda is extensive and emphasis is as a rule placed on relevant challenges faced by the global community and by individual countries. And in this respect, challenges related to the fourth technological revolution or industrial revolution have a bearing on almost all aspects of our life. Strange as it may seem, this is undoubtedly related to our financial sector, our economic development. As a development institution our bank is interested in the themes on the Forum’s agenda that are related to financial sector and development banks. In this respect, a very interesting session of financial institutions’ leaders was held yesterday - it was devoted to long-term financial resources that are used to fund long-term, expensive large-scale projects. This issue is topical for all investors and development institutions because many of them follow Basel recommendations and there is a definite gap between short-term resources used by banks to fund their transactions and long-term resources that are committed to fund major, above all, infrastructure projects. This is an issue that is also of great interest for governments, regulators and investors. High priority in the Forum’s agenda is also given to the situation in individual countries. Today’s panel discussion devoted to prospects for the development of the Russian economy was very interesting and useful. To my mind, the discussion aroused vivid interest not only among member of the Russian delegation but also among foreign representatives and businessmen. You asked a question about our bilateral meetings. Undoubtedly, we use the Davos venue to hold talks with as many of our partners as possible and our discussions show that we as bank for development and Russia as a whole are of interest for them. Because of sanctions, some of them do not maintain business relations with us, they do not fund our projects but we maintain contacts at various levels and here I mean not only national financing institutions but also international financing institutions such the European Bank for Reconstruction and Development, the International Finance Corporation, the European Investment Bank. This process has never stopped and our conclusion from the conversations we had is that our foreign partners demonstrate their vivid interest in what is going on in Russia as well as their readiness to get down to implementing joint projects with Vnesheconombank in Russia as soon as sanctions are lifted.

HOST: What should the Russian Government do? Now a strategy of mid- and long-term development is being developed. What measures in your opinion should this new anti-crisis strategy include?

Vladimir DMITRIEV: I think there is no way of devising something radically new. For many years we’ve been talking about the need for structural reforms. I think it’s high time now to move from words to action, we should get down to reformatting the budget for it to be in line with our current capabilities, adapt to the current conditions related to oil prices volatility, lower oil prices and the ruble’s volatility. What is important for the economy, for businessmen and investors is predictability, confidence in economic sustainability and in consistency of reforms. I think that the state should identify priorities and when I say that the budget should be reformatted I mean that we have to look at the way we use our budgetary expenditures with regard to various federal target and special programs. We insist that a part of these programs could be funded on a reimbursable basis through development institutions ensuring control over a targeted use of budgetary funds, technological control and financial audit. We should make strenuous efforts to optimize budgetary expenditures and increase their efficiency.

HOST: This morning in the course of discussion, European journalists asked questions about Olympic credits. Should they be repaid by investors that took them or through receiving the state’s support.

Vladimir DMITRIEV: We regard the Olympic program that we funded as a project of national significance. This hugely expensive project financed with investors’ and budgetary funds resulted in creating the world’s class alpine-ski resort, well-equipped stadiums and recreation zones in Imeritinskaya Lowland at the Black Sea seaside. These projects were financed through using borrowed funds and we raised credits in foreign currency abroad but extended them in rubles. And now we have problem repaying credits to foreign creditors. Initially, the state confirmed that it assumed joint and several liability for borrowed funds extended to our investors together with Vnesheconombank by issuing Olympstroy’s surety to Vnesheconombank. When they started to plan to liquidate Olympstroy there was a serious high-level talk that Olympstroy’s surety should be replaced with a guarantee of the Russian Government. Now we have neither Olympstroy nor its surety and we don’t have any guarantees either. We believe that we are on the right path in our dialogue with the Government but we should create favorable conditions for investors for them to be able to repay these credits to either Vnesheconombank or to the state.

HOST: What’s the amount of these credit facilities?

Vladimir DMITRIEV: We granted credits worth 220 billion rubles to fund the Olympics. This year, we estimate our indebtedness under foreign credits at 2 billion dollars.

HOST: For the most part, credits to what courtiers?

Vladimir DMITRIEV: These are such large -scale projects as Roza Khutor, Krasnaya Polyana, projects in Imertinskaya Lowland. They range from 20 to 80 billion rubles.

HOST: What foreign countries extended credits?

Vladimir DMITRIEV: Basically, these are credits to foreign banks and foreign investors which bought bonds issued by Vnesheconombank.

HOST: When might a decision be taken on providing the state’s support for VEB?

Vladimir DMITRIEV: I would say with thanks to the Finance Ministry that measures of the state’s support have already been taken including reconsidered subordinated foreign currency deposit made available from financial resources of the National Wealth Fund. Its interest rates and terms were reconsidered in such a way as to improve Vnesheconombank’s balance sheet indicators. We have arrangements with the Finance Ministry that provide for placing funds of the Federal Treasury in significant amounts of up to 50 billion rubles on pretty favorable terms in Vnesheconombank thus making it possible for us to address current liquidity issues. But package support measures are to be implemented until this February. There is no doubt that Vnesheconombank remains to be a key financing development institution and it will keep on performing its functions but at the same time the state support will support Vnesheconombank for it to be to repay debts in due time and in full to foreign and Russian creditors. But we are well aware that we have great potential inside the Bank related to reducing general administrative expenses, optimizing our loan portfolio and asset management. We’ll use these potential capabilities to minimize budgetary expenses and perform functions of a bank for development.

HOST: And now my last question. Now we can see a highly volatile foreign exchange market. Do you think that such volatility will remain unchanged in the near future?

Vladimir DMITRIEV: Despite the fact that oil and energy price volatility is a lot greater than the ruble volatility, a certain correlation between the ruble exchange rate and energy prices exists. And in the foreseeable future this correlation will continue to persist. But there is also no doubt that the implementation of the government anti-crisis program and carrying out structural reforms in the Russian economy will have a positive impact on our future and on the correlation between the ruble exchange rate and energy prices. We must put an end to our unconditional dependence on energy prices.

Is there a maximum low level in the decline of the Russian ruble exchange rate?

Vladimir DMITRIEV: I’m afraid I can’t give you a correct answer until the ruble exchange rate depends unconditionally on energy prices.

HOST: Vladimir Alexandrovich, thank you very much for finding the time to answer our questions.

Vladimir DMITRIEV: Thank you.