Kremlin officials get down to work on $20bn VEB bailout package

VneshekonombankVEB bailout: Having announced earlier this week that it was to allocate $2bn to the troubled Vneshekonombank (VEB) to stave off immediate bankruptcy, Russian officials are now discussing sweeping measures to save the development bank after its bailout needs rose to around the $20bn mark. The bank, which in recent years has borrowed heavily to fund Russia’s Sochi Winter Olympics and other politically driven projects, ran into difficulty after Western sanctions cut its access to international lending in 2014, leaving it struggling to repay its debts.
The plan, which is intended to boost VEB’s capital, increase its liquidity and potentially shrink its balance sheet and stock of bad loans, is believed to include the following options:
• The Central Bank converting hundreds of billions of roubles of loans into capital
• A number of state organisations depositing large amounts of cash at the bank, including the Finance Ministry ($813m), the National Welfare Fund ($740m), and Russia’s Pension Fund ( at least $1.5bn)
• VEB selling some of its assets including a 2.7% stake in Gazprom (currently valued at $1.3bn) along with shares in Sviaz-Bank and Globex Bank, and Ukraine’s Prominvestbank
• Auditors being invited to probe its VEB Capital subsidiary
• Spending on charitable causes being trimmed to $15m
• Assets that belong to special projects, probably including the Winter Olympic being spun off into separate entities, potentially removing them from VEB’s balance sheet
Since it was set up in 2007, VEB has been closely monitored by President Vladimir Putin and, despite its stated aim of financing export and industrial modernisation, it has repeatedly been used to fund for politically motivated projects.