VEB is being used as an Emergencies Ministry

13 june 2013 года
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Dmitry Kazmin
Vedomosti.ru
13.06.2013

Vladimir Dmitriev tells us why the economy does not have enough long-term money, how to reduce credit rates and what new types of cooperation VEB’s subsidiaries are ready to offer to investors

Almost two years ago in his interview to Vedomosti Vladimir Dmitriev said that VEB was ceasing to tackle the crisis and starting to operate on its own as a development institution. He expected that the state corporation would be able to triple its loan portfolio without being funded from the budget. Eventually, the loan portfolio grows at required rates but VEB is again in need of budgetary support  “There are grounds for being moody because VEB is being used as a quasi-budgetary instrument”, says Dmitriev and tells what he likes and what he does not like in the way his Bank operates and is being used by the state.

- VEB’s strategy until the year 2015 was approved and provides for its loan portfolio to grow ambitiously. Will you be able to implement these plans and aren’t you going to adjust them, given the current economic situation?

Biography

Born in 1953. Graduated from the Moscow Finance Institute, specialty – “International Economic Relations”.

1987

Second, first secretary, Embassy of the USSR, Russia in Sweden.

1995

Deputy Chief Executive Officer, Russian Finance Ministry Department of Credits and Foreign Debt.

2002

Bank for Foreign Trade of the USSR. Deputy Chairman of the Board. In 2002, was appointed as Board Chairman of the Russian Commercial Bank (Cyprus), Vneshtorgbank’s subsidiary bank.

2004

Bank for Foreign Economic Affairs of the USSR, Chairman.

“We didn’t find all its skeletons right away.”

VEB has a bank in Ukraine  - Ukraine’s Prominvestbank. According to Dmitriev within a month they’ll additionally capitalize it for an amount of 350 million dollars. The bank needs additional resources to address the problem of bad credits it received from the former management. “The situation in Ukraine is pretty unfavorable including problems with repayment of debts but they manage to get some debts repaid,” says Dmitriev. “Some fail to repay a credit referring to personal connections; others just don’t want to pay. And then some say they are ready to take debts through paying 10% of their par value.” According to Dmitriev a decision to purchase the bank in Ukraine was “political”. “At that time the bank was on its way to bankruptcy, its potential was strong. But unfortunately we didn’t find all its skeletons right away and it proved to have more closets than we thought. In principle we bought this bank to work with major customers that had links with Russia”. Dmitriev says that the bank didn’t participate in making payments for gas. “The fact is that main contracting parties of Russian companies were served in this bank. Moreover deposits started to outflow from the bank, the situation posed a threat to the whole Ukrainian banking system and Russian banks operate there. By the way we bought the bank for 250 million dollars in November of 2008 and as early as in April Italians offered to the bank’s owners to buy it for 2.5 billion dollars. They refused because they thought it cost at least 4 billion dollars.  The bank was controlled at the time by the former Chairman of Ukraine’s National Bank who privatized it out of hours”.


Vnesheconombank
State Corporation

Founder – the Government of the Russian Federation.

Financial Indicators (IRFS, 2012):

Assets - 2.9 trillion rubles

Capital – 531.9 billion rubles

Net profit – 17.5 billion rubles

- Yes, we are. But before talking about our strategy we should talk about alarming signals in the economy. The President and the Prime Minister held several meetings on this issue. Key signals are reduction in economic growth rates. A real slump in production in some sectors, reduction in investments in fixed capital make us think hard about what additional measures VEB and its subsidiaries could take to support the state’s efforts to counter such negative trends.

- Have you drawn appropriate conclusions?

- We can see that VEB is not a panacea and the only development institution in the country but the Bank could play a crucial role in breakthrough sectors through its investments in the real economy. I’d like to highlight the following point: economists say that the growth in banks’ loan portfolios is enough to get the economy functioning normally. But if we open these portfolios, we’ll come up against a very interesting circumstance. In 2012, 1.5 trillion rubles were spent on M&A transactions with Russian assets. This is twice the amount of commercial banks’ credits for fixed capital renovation. This means that capital flows from one pocket to the other and investments are not made in the real economy. The economy does not get enough long-term money and this is a problem the state should concentrate on using VEB’s capabilities.  

- We’ve just got back to the loan portfolio…

- We hope to bring it to 800 billion rubles by the end of the year and under our strategy it is to amount to 850 billion rubles by 2015. In 2012, our loan portfolio increased by 42%, I believe we’d be able to exceed the target of 850 billion rubles. To tell you the truth, there are two constraining factors in increasing our loan portfolio. The first is capital adequacy ratio of 10%, the second – borrowing limits. To be within the set limits we should either increase our loan portfolio or increase our capital base. As far as our capital base is concerned we are unfortunately limited by our profits. Budgetary funds are used in a targeted way to fund specific programs although we understand that this is caused by budgetary constraints.

- It appears that a question of the Bank’s capitalization will arise soon?

- Sooner or later. We haven’t brought it up so far but it will arise when we come up against the need to meet capital adequacy requirements.

- When might this happen and how much money might you need? And what do you hope for, given substantial budgetary constraints?

- We are working on this issue with the Finance Ministry but it’s too early now to give any specific figures.

- If you don’t give figures one might think that you are asking for a lot of money.

- We have some time till August when we’ll get to know about amendments to the budget. We are sure to discuss them.

- Are you happy with your loan portfolio composition? There are different opinions on this account including those that there are many projects in it which are not closely related to VEB’s objectives?

- There are grounds here for being moody because VEB is being used as a quasi-budgetary instrument.

- As a rescue team?

- In a way, as an emergencies ministry. In the case that something can’t be funded from the budget or problems emerge in some sectors, there is VEB that has to come to the rescue. I’m not naming any names. Commercial banks and other innovation institutions invested in innovative production facilities but their products proved to be in no demand, the global market moved in a different direction. And they are asking the Government to get VEB to replace their investments with its own. We also receive letters from regional leaders: there is a very good project, very important for the region’s development but VEB does not take a positive decision. We offer them to fund an engineering stage, make a model and conduct a feasibility study. They want us to provide them with money. I’m sure that given such an approach any commercial bank wouldn’t agree to fund their projects including banks with state participation.

- How often do you receive such requests?

- We receive them quite often. And those who turn to VEB for money often stress the importance of social issues. For example, a head of a region comes and says, “I have an election coming up and a new plant will employ 1000 people, do you care about national interests? I’ll file complaints against you”. Thankfully, we, the RF government office and the presidential Administration think in the same way, they explain to those who ask for money for what purpose VEB was established.

- Can you name the governors who visit you?

- There aren’t many of them and I’m not going to give their names.

- What do you think should be done to change this sort of approach? Maybe it makes sense to change your organizational and legal form and dilute state capital?

- The only thing we can do here is to educate them in the proper way. Nobody is going to change the Bank’s organizational and legal form. And the world practice shows that the state should be the sole owner of the Bank for Development. But we also should operate in accordance with our Memorandum without expanding our functions endlessly and without having to perform functions that prevent us from carrying out our development mission.

- The Chairman of the Central Bank is to be replaced soon, should a regulator stimulate economic growth and how? What’s your opinion?

- It should and the Central Bank does it but within its powers and competence, that is, through monetary policy. We can feel the effects of its policy, here I mean lending against pledge mechanisms. We are worried a lot about credit rates. They depend not only on the Central Bank although the regulator could influence them in a more active way through inflationary expectations. Elvira Nabiulina also understands this, but I don’t think that she will bring revolutionary changes to the Central Bank’s policy. And do we need them at all?

- Don’t you recommend to change basic rates including refinancing ones?

- Refinancing rates are not main benchmarks for banks. Repo rates are more important for them. On the other hand, bank margins amount to tens of percentage points in consumer lending. Even if we take large banks including those with state participation, their net percentage margin amounts to 7%. This is a problem we have to think over. Any large foreign bank could envy such a margin, with its profits being a lot higher than those in Russian banks. Our margin is about 2%.

- And how does it change from project to project?

- It doesn’t change from 1.5% in one project to 10% in the other, it is about 2% and it changes within this range. As far as Olympic projects are concerned our benchmark is refinancing rate plus 0.4-1.6%.

- What projects are you interested in? What are your priorities now? For example, the Far East?

- In terms of development of territories there are three lines of activity: the Far East, the North Caucasus and Kaliningrad. And we are also going to go ahead vigorously with our core projects, which can bring about a technological breakthrough. These projects are in such sectors as space, information technologies, biomedicine and aviation industry.

- The Government places great hopes on TIF investment mechanism which provides for a return of investments through future taxes. What role will VEB play in this mechanism?

- The idea is that a private investor creating infrastructure synchronizes its action with an industrial investor which builds a production facility on this infrastructure. Additional taxes received from the project and comprehensive development of territories are to be then returned to investors. Here VEB can act as an investment consultant, prepare documents for lenders, raise funds to finance a project and help pay for pre-project work. There are many options for participating in such projects but it’s important to analyze and assess them properly.

- What projects are they? And why is it important to analyze them properly?

- The problem is that sometimes they tell us about projects worth 10 trillion rubles and 90% of them are not even applications but just ideas. And this is not the only problem. So far we have failed to understand how to synchronize functioning of local, regional and federal budgets with regard to TIF. For example, a comprehensive housing development project in the city of Kirov: 80% of expenses on infrastructure is incurred by the municipality but the local budget and the region receive only 20% of new tax revenues. So, as Alexandr Livshits said, the federal budget here should share taxes with local budget and regions.

- I know that another new investment mechanism is under discussion. Under this mechanism an investor entering into a complicated project together with the Russian Direct Investment Fund can receive debt financing from VEB to pay its share.

- So far the Russian Direct Investment Fund (RDIF) have participated in implementing projects with financial investors, for example, in the field of medicine, they took part in the “Mother and Baby” project. If RDIF comes to us and says it has an industrial investor in the greenfield, let’s work out a scheme together  to provide a project both with share and borrowed capital and  this doesn’t run counter to our Memorandum at all. I know that RDIF has several such greenfield investors in its pipeline and we’ll work together on searching attractive transactions for them.

- VEB is a main creditor of Olympic facilities construction. Will they be built in due time? Do you expect credits to be repaid?

- We have already extended credits worth 110 billion rubles till the end of the year the amount of credits will be about 220 billion rubles. As far as construction periods are concerned construction schedules are realistic, the construction will be completed by the Olympics. It’s also no secret that according to our estimates a significant part of projects is estimated to be unprofitable. Given the current model and market conditions we have serious problems with recoupment of investments. For example, in the Imereti Lowland one million square meters of hotels are being built. When the hotels are put on the market after the Olympics, it will be difficult to bring occupancy rate even to 60%. Many projects got a lot more expensive in the course of their implementation because of technological changes or strict environmental standards. We have no full project documentation on many projects, there are no confirmed cost estimates – all this confirms our doubts.

- Are there any projects that pose no problems?

- We have no doubts about the future of the Sochi thermal power station; the airport doesn’t pose any serious problems. But the situation is pretty tense with sports projects. As far as repayment of credits is concerned we received guarantees from all investors that in the case that problems emerged after the Olympics they would resolve them using their own funds. We have received guarantees from Olympstroy but these are budgetary funds and we really care about their future.

- You are the Board Chairman of the United Aircraft Construction Corporation (UACC), how do you size up the Corporation development strategy?

- At our last meeting of the Board of Directors we discussed the management’s report on the Corporation’s performance for 2012, the dynamics is positive. We – I mean the Board of Directors expect the Corporation to operate on a breakeven basis by 2015. Of course here government defense orders and advance payments on supplies play a very important role but not only they play such a role. The proportion of civil aircraft in UACC total sales in 2012 tripled and amounted for the first time to 10%. Governance of the Corporation’s structures is consolidated according to “one window” principle. This is not the case now when individual plants took unsecured credits at enormous interest rates from poorly known banks. And the strategy remains the same – it is aimed at creating a range of aircraft  that are competitive not only in Russia but also abroad, above all in the countries where we haven’t lost our positions.

- To what extent is it true that you can surrender your position as Board Director to Sergei Chemezov and that Mikhail Pogosyan might resign?

- There is much talk. Sergei Chemezov and I as an independent director were nominated by the state to the Board of Directors, voting is to be held at the upcoming shareholders’ meeting. As to a position of director general a decision on it is to be taken in a collegial way. I for one and I think my colleagues have no reasons to question Mikhail Pogosyan competence. I haven’t heard about other candidates for a position of director general.

- The crisis left VEB with three banks. Are you going to sell or develop them?

- We are just finishing work on formulating a strategy, above all, with regard to Globex and Svyaz-Bank. 80% of work has been already done. A sale of banks to a strategic partner or through IPO is a distant prospect. We should prepare the banks’ assets for sale as we took the banks on our balance sheet. They have god assets for example Globex has Novinsky Passage and a shopping center in Novosibirsk.

- So, you are going to develop them?

- Yes, we are. In terms of strategy these banks are universal but each with its niche. Globex gives high priority to corporate customers although it also works with natural entities and is even involved in mortgage lending. Svyaz-Bank works with communications companies and with the Post of Russia on pension accounts. It’s also involved in military mortgage lending which is in the focus of our attention. The Bank accounts for the fourth of military mortgage lending market and is going to retain its position. We’ll capitalize both banks through entering into their capital directly and subordinated loans.

- We’ve just moved to the post. What happened to the idea of establishing a Postal Bank? They say that Alexandr Kiselev was against the idea but he’s left now.

- I don’t know to what extent he was against the idea. But necessary conditions for establishing a Postal Bank have not been created.  They include transforming the Post of Russia into a joint stock company and agreeing upon a question of how the Post of Russia should be funded to purchase shares of a new bank.

- What stake can be sold to the Post of Russia?

- It’s a matter of independent valuation that nobody hasn’t made yet.  The Post of Russia has made its own valuation and announced an unacceptably high price. And in the course of the discussion the Post of Russia stepped up its financial activity and entered into agreements with almost 30 banks. And it became possible to offer credit services to people through post offices. The idea is now put in cold storage. I don’t think that it is dead but there are no necessary conditions for pushing it forward and such investors as Nomos-Bank and Russky Standard appear to have become indifferent to the idea.

- Do you personally support the idea?

- I don’t see anything bad in pushing it forward.

- Alexandr Lebedev told you that he could buy out real property of Globex. Do you favor his proposal?

- We have never considered it seriously. We do not regard newspaper publications as offers. Lebedev has never made a real proposal.

- There is another “crisis bank” – Ukraine’s Prominvestbank. What do you plan to do with it?

- We plan to further develop it. Within a month we’ll additionally capitalize it for an amount of 350 million dollars. The bank needs additional resources to address the problem of bad credits it received from the former management. The situation in Ukraine is pretty unfavorable including problems with repayment of debts but we manage to get some debts repaid. Some fail to repay credits referring to personal connections; others just don’t want to pay. And then some say they are ready to take debts through paying 10% of their par value. The bank is among the largest six banks in Ukraine and is one of the most reliable banks. We have no complaints against its management. Now we are developing a mechanism for transferring to making regional payments in rubles.

- What did you purchase this bank for?

- A political decision was made. At that time the bank was on its way to bankruptcy, its potential was strong. But unfortunately we didn’t find all its skeletons right away and it proved to have more closets than we thought. In principle we bought this bank to work with major customers that had links with Russia.

- Some say the bank participated in making payments for gas.

- This is not the case. The fact is that main contracting parties of Russian companies were served in this bank. Moreover, deposits started to outflow from the bank, the situation posed a threat to the whole Ukrainian banking system and Russian banks operate there. By the way we bought the bank for 250 million dollars in November of 2008 and as early as in April Italians offered to the bank’s owners to buy it for 2.5 billion dollars. They refused because they thought it cost at least 4 billion dollars. The bank was controlled at the time by the former Chairman of Ukraine’s National Bank who privatized it out of hours.

- Did you discuss an idea that VEB would take Rosselkhozbank’s problem assets worth 150 billion rubles on its balance sheet? Are you still discussing this idea?

- No, we are not.

- In 2010-2011, VEB bought from E.On ADR 2.7% of Gazprom’s capital for an amount of more than 100 billion rubles. Now the stake got a lot cheaper. What do you propose to the Government to do with it?

- Since its purchase its price fell 30%. So, we didn’t make any proposals leading to losses (that is about a sale) to the Government. We’ll wait until its price grows. But it’s not only a matter of price. VEB’s 3.6% stake allows the state to control the company.

- At some point the stake’s price was higher, were you offered to sell it then?

- Yes, we were. If we had sold the stake in April of 2012, we would have made a profit of 30 billion rubles. But at that time VEB’s Supervisory Board believed that it made no sense to lose the asset.

- Are you interested in buying the BAT-Yava factory? If you are, what are your plans for the plant?

- Yes, we are but only in connection with Slava facility which we received in the course of rehabilitating Globex. BAT-Yava is next door to Slava. We are going to build hotel-office buildings there including living apartments and there is a tobacco factory nearby and it smokes. So, it’s easier to buy out the asset and develop the territory in a comprehensive way.

- How much are you ready to pay? Have you already made a proposal?

- I for one haven’t discussed this issue with BAT-Yava’s owners.

- VEB approved a credit worth 60 billion rubles up to the year 2020 to AvtoVAZ. Has the plant started to use the funds and what projects are they going to fund with them?

- So far, we have a decision concerning limits. Now we are examining individual projects comprehensively, these are modernization designed to produce a new rage of cars, expansion of production including a purchase of equipment and retooling of shops.

- What other projects do you have in the automotive industry, are you to extend credits to other players?

- We have quite a few projects in the automotive sector. To some extent we cooperate with Russian key players. Our key partner is FordSollers and Sollers’ projects in the Far East. As to them we are funding three production facilities including assembly, manufacturing of engines and components. We are also working with GAZ Group specifically on a project in Yaroslavl (the Yaroslavl engine plant). But these are not new credits, all the decisions were already made.

- Did the crisis in Cyprus affect VEB or your customers?

- It didn’t affect our bank at all, we are not working with the Bank of Cyprus and Laiki. We make interbank payments with the Russian Commercial Bank, we didn’t have any problems with it. Now we are conducting inventory auditing to see how the Cypriot crisis affected our customers.  We haven’t seen any worrying signals so far.

- How do you feel about accusations against Anatoly Ballo over the alleged abuse of office in connection with a 14 million dollar credit to Eurasian?

- Recently the Presidium of the Moscow City Court made a ruling that a criminal case against Anatoly Ballo had been opened illegally and sent the case materials for a new consideration. This says a lot about the case. No damage was caused to the Bank, the credit was repaid. Criminal cases were closed with regard to two suspects.

- Can you comment the situation with Zarechye-2?

- In 2006, Vnesheconombank extended a credit to LLC Zarechye-2 for the construction of a residential compound in the Odintsovo district of the Moscow region. At present, the project has not been carried out and there is a threat that the credit will not be repaid. Vnesheconombank informed LLC Zarechye-2 repeatedly that it must fulfill its obligations under the credit agreement. Considering that the borrower failed to fulfill a number of obligations under the credit agreement Vnesheconombank demanded the borrower to repay the credit worth 170 million dollars. Later on Vnesheconombank appealed to an arbitration court to protect its interests. Moreover, as a result of conducting construction and financial-accounting examinations on the Bank’s initiative, facts of credit funds embezzlement were revealed. In relation to this Vnesheconombank appealed to law enforcement authorities requesting them to check if the credit was used properly and open a criminal case against officials of Zarechye-2 and its beneficiaries over the facts of monetary funds embezzlement. The State Corporation intends to take all legal actions to protect its interests.

- Why did you decide to rebrand VEB?

- We decided to rebrand not only Vnesheconombank but also the whole of Vnesheconombank Group being aware that we’ll be together for a long time. So, visual representation should not be associated with old symbols and be in line with an image of the National Bank for Development. The current brand is outdated. Moreover, Vnesheconombank Group is composed of various companies; they have different stylistics and position themselves differently. All this creates obstacles to communication and makes it difficult to get a realistic picture about VEB Group’s activity as a whole and opportunities our subsidiaries open up for Russian business. We hope to use synergy of all participants in Vnesheconombank Group in order to create strong brand – VEB. As to transferring to laconic abbreviation – VEB, its new graphic presentation and its new company style will be recognizable, modern and dynamic.  And abbreviation VEB has been used for many years by us and the mass media.

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Long History of Long-Term Money

14 may 2013 года
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The Moscow News
Newspaper № 522(522)
May 14,  00:05

Vladimir Loevetsky

 

In his interview to the Moscow News Director of Vnesheconombank’s Trust Management Department Alexandr Popov told about long-term investments, prospects for pension money and habits to change the rules of the game

- We can say that Russia is hunting for long-term money. The President, the Prime Minister, ministers and industrialists are all talking about long-term money. Long-term money is associated with prospects for economic growth and above all with infrastructure development. Many other projects are also in need of long-term investments. Besides direct investments from the state’s budget, which is already overloaded with allocations, where can we obtain long-term money? In the countries with advanced financial systems pension, insurance and investment funds have long become sources of long-term money. And what about us?

- Basically we have the same sources - both potential and real ones. Above all, I mean pension money and then companies associated with life insurance. Investment funds and banks hold third-fourth place. Although probably there will be no real long-term money in the banks until irrevocable deposits appear. Of course, theoretically such major banks as for example Sberbank have such resources as it holds half of all deposits. And even if its share of irrevocable deposits diminishes it will still hold a significant amount of these resources. But irrevocable deposits would play a significant role for the banking system as a whole. So far there are no irrevocable deposits, they are not allowed by law. If the Civil Code allows banks to introduce irrevocable deposits it will help them a lot to create long-term financial resources.

- People will probably be afraid of depositing money for a whole period without the right to withdraw their deposits.

Anyway we should try. We can’t force people to do it; they have the right to make a choice. But we know that we can interest them with higher interest rates. Irrevocable deposits will become guaranteed resources. And depositors will have higher interest rates for longer periods. Of course not all people will rush to make such deposits. But the most important thing is to observe the rules of the game. A new source of long-term money will gradually come into being. In general, it takes time to create such a source.

Alexandr Popov
Director of Vnesheconombank’s Trust Management Department

 

Born in 1970.

Graduated from Social Economic Department of the Institute of Asia and Africa under the Lomonosov Moscow State University.

In 1995 started to work in Vnesheconombank as a trader.

Since April of 2005 – Director of the Trust Management Department

As far as mutual investment funds are concerned the rules of the game play a great role here. Until a certain period of time incomes from selling units of these funds owned for more than three years were exempt from taxes. Then, this tax exemption was abolished, thus eliminating a significant incentive for long-term investors. And now the President ordered to equalize opportunities for those whose deposit in banks, mutual investment funds and other instruments. Without this, it will be difficult for us to create a significant financial base for such funds, nevertheless compared with bank deposits mutual investment funds are much lesser resources because it’s more difficult to deposit in such instruments as people need to have minimal financial literacy.

- What about life insurance?

Compared to investment funds life insurance is of course simpler. The problem here is how to make people deposit in them and what incentives we can use as well as how publicize these insurance products? At present, out of available instruments pension funds are the simplest products and most importantly they have existed since 2002. By the way, this system is developing pretty normally – in any way people become interested in their pension savings. Now 30% are no longer undecideds, they make decisions on their own and choose nongovernment pension funds. If the system didn’t work, people would remain passive. But unfortunately, by our Russian tradition if something starts working our patience runs out and we demand that the system should work in the most efficient way and they start to change the system fundamentally and we lose almost everything that we have achieved.

- Perhaps arguments over pension reform are not over yet. In its original version mandatory contributions for a funded portion of pensions were significantly reduced from 6 to 2%. And there were proposals to move to only voluntary contributions.

- On the one hand we have been talking so long about the need for long-term money. And pension funds gradually became such resources. And on the other hand these resources are being greatly reduced. 2% is already an absolute minimum.

- And then this version was somewhat softened. 2% for those who have never made a choice or written an application, that is for, “undecideds”. And 6% - for those who choose a non-government pension funds.

- This will significantly reduce investment potential of VEB as a state managing company. As far as nongovernment pension funds are concerned we don’t know yet how people will respond to this change. People have just started to get used to the existing system and rules and started to choose the nongovernment sector to a greater extent. Regulators also started to better understand how to better exercise control over the situation with pension savings funds. Initially, supervision was so strict that it was an obstacle to generating incomes rather than a means to secure the protection of pension funds. Only recently state managing companies have become able to work with more various instruments, strenuous efforts are also being made to ease restrictions for nongovernment pension funds. And the most important achievement is that inflation went down. At last, the real value of our pension money became positive - higher than inflation. Unfortunately, credit rates are high; they are also higher than inflation. But this is a normal economic situation when real rates are positive. And in the situation when the investment system started to operate a lot better, all the rules are being changed.

- In response to this they say: How come inflation went down but credit rates did not?

- First, inflation didn’t go down that much. And second, credit rates allow for inflationary expectations. This means that market players are not sure that inflation will go down further. Nevertheless, we are now in a position to perform our functions to really ensure the protection of pension savings funds so that yields on pension funds are at least no lower than inflation. And nongovernment pension funds are also in a position now to generate positive yields. But given that the whole funded pension system is changing, we don’t know exactly how people will respond. And it’s not that they might prefer nongovernment pension funds, they can lose interest in the funded pension system as such. And they started to become interested in it. And this interest could form the basis for voluntary pension savings. Behavioral patterns do not come into being fast. In this line of business a ten-year period is not a long period at all. And now the emerging behavioral pattern is being challenged.

- Mandatory pension savings already amount to 700 billion rubles.

- So far, we have no answers even to elementary questions: if you for example you want to remain in the Russian Pension Fund but retain six-percent contributions for a funded portion of your pension or on the contrary you have chosen a nongovernment pension fund but want to reduce contributions for a funded portion where are you supposed to submit your application to? To the Russian Pension Fund? To a nongovernment pension fund? To your employer? I couldn’t make sense of all those points and coefficients in the pension formula under consideration now, which should somehow link length of service, wages and etc. And it doesn’t allow people to understand if it’s better for them to increase insurance portion of their pension hoping that by the time of their retirement state finances will be in order or to rely on funded portion of their pension hoping for investment yields?

- Nevertheless, pension money is already being used in our economy and they plan use it to a greater extent. In this respect, they often talk about infrastructure bonds.

- I don’t like this term very much. They issue corporative bonds all over the world and funds from them are spent in accordance with an issue prospectus. They also issue project bonds the funds from which are used to finance specific projects. Basically, these bonds are in need of qualified investor. We of course can and should invest pension savings funds in infrastructure projects. The question is who should be provided with them and for what purpose. In our country project finance is in its infancy. Project development is not satisfactory as a rule. And it’s common knowledge that there are few specialists in this line of business. The other part of the problem is legislation associated with project finance. We have to improve it. We should for example create special business entities that are better protected against bankruptcy. It will be impossible to levy execution upon a project if a company failed to fulfill its other obligation in full. There are also other risks. And we can’t just say: stay clear of the project, it is of national significance. If the project is so important, it should be backed by a rating or a state guarantee. Then we can use pension funds to finance such a project.

- But if a project is backed by a state guarantee, we have to use funds from the budget.

- You are quite right. Here a lot depends on the quality of analytics and preparation of a project to be backed by state guarantees. Moreover, if the state provides guarantees for a project, it should mean that no obstacles will be raised upon its implementation and it will enjoy the state’s full support at its all stages. And in this case, the Finance Ministry would provide guarantees more readily. As far as pension savings funds are concerned our minimal objective is to manage them on a break-even basis and moreover they should generate incomes.

- In what projects is VEB as a state managing company investing pension money buying out this sort of bonds? What bonds are backed by state guarantees?

- The first projects that we partially funded using pension funds to buy out bonds of project engineering companies were the motorway Moscow – Saint Petersburg from 15th to 58th kilometer, the Odintsovo bypass, the construction of the Western High-Speed Diameter in Saint Petersburg. All these bonds are backed by state guarantees and they generate good incomes. Coupon is inflation rate plus 2-3% or a high fixed rate of more than 9% per annum.

- Are you sure that these projects will pay back the investment?

- Yes, they will. These are toll motorways designed to unclog extremely congested traffic arteries. Toll road tariffs are pegged to inflation. Everything is all right here. There is another problem here. We have so far bought project bonds. But as in this case VEB acts as a state managing company and invests pension funds we buy these bonds only if they are backed by state guarantees. In our capacity of a state managing company we are just investors and we are not in a position to be involved in an expert examination of a great number of projects. Who is supposed to analyze a project? If it has a credit rating, it means that a respected rating agency accredited under the Finance ministry is to study a project and assign a rating to it.

- And you will be able to make a decision based on this rating?

Yes, either guarantees or a rating. But there are various practices in the world. For example, in England there is a governmental institution engaged in project analysis. If it approves a project the state can invest budgetary money in this project, so here we have a sort of quality status stamp.

- Today there are plans to invest pension funds in RZHD, the Federal Grid Company as well as in Transneft and Rosatom. Their bonds are unlikely to be backed by state guarantees. So, you will buy such bonds on the basis of ratings?

- They have a rating. RZHD and the Federal Grid Company have a sovereign-level rating. Of course, it’s one thing if bonds are issued for a period of 5-7 years and it’s quite another thing if we have 15-20-year projects. But if a company is ready to pay inflation rate plus some percent above inflation we can invest pension funds. We can also buy long-term bonds but only from issuers with at least a sovereign-level rating. RZHD has such a rating from three international ratings agencies. And it is experienced enough in issuing long-term eurobonds.

- Nevertheless, if such a company stops paying?

- For this reason, such companies are required to have at least a sovereign-level rating. Such companies won’t disappear and won’t go bankrupt. Here I mean large companies with big capital. They all have a room for maneuver. If a specific project does not yield expected results, then they can transfer money from a successful project and make payments on bonds. There is no doubt that such large-scale projects like BAM (the Baikal-Amur Mainline) do not payback. But RZHD will not build BAM using pension money. It will if it gets budgetary funds. And it can invest pension savings funds in other commercially acceptable projects. And we are going to see if its ratings are not changing. In any case the issuer should have at least a sovereign-level rating.

- Today there pension savings funds worth 1.5 trillion rubles under Vnesheconombank’s management. Is this sum going to increase, diminish, will there be others who will want to receive this long-term money?

- It’s already 1.6 trillion. This sum looks big only at first sight. The fact is that the money has already been invested and not only in government bonds but also in corporate bonds and is already being used to fund the construction of motorways, railways and grid electric facilities. But the amount of money is limited and requirements for developing infrastructure, mortgage lending and for implementing other long-term projects are huge. As a state managing company VEB is the largest investor in mortgage bonds. As to our new investments, we expect to receive financial resources from the Russian Pension Fund. Last year we received 300 billion rubles from it and for various reasons we returned about 125 billion rubles. So, the net inflow was 175 billion rubles. But if mandatory contributions to funded portions of pensions go down to 2%, the situation will change radically. Undoubtedly, we’ll receive yields from investments in bonds already made plus funds from redeeming bonds. But our potential for investments in infrastructure companies, project bonds and mortgage lending will diminish significantly if not disappears.

- You manage long-term money as a state managing company. And what will happen to another source of investments – savings in nongovernment pension funds?

Nongovernment pension funds have more than 700 billion rubles in mandatory pension savings funds and these resources are becoming quite significant. And attitudes to this money are also changing for the better. Once a law on guaranteeing pension savings is enacted, a requirement for pension funds to be managed on a breakeven basis each year must go away, to tell you the truth this requirement is silly. First, it prevents nongovernment funds from making money. And second, given this requirement, it makes no sense to talk of long-term-money. If the law is passed, it will make nongovernment pension funds more attractive and they will be given a chance to make long-term investments. All this will probably require to exercise stricter control over their activities and for this purpose we need a mega regulator being created now whose functions are to be performed by the Bank of Russia.

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Bazhenov: PPP is not a legal norm but an economic concept

26 april 2013 года
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Director of Vnesheconombank’s PPP Directorate Alexandr Bazhenov’s Interview to RIA Novosti News Agency

On April 26, the State Duma is to consider a Draft Law “On Basics of Public Private Partnership in the RF” which will make it possible to form a legal framework for implementing PPP projects. Director of Vnesheconombank’s PPP Directorate Alexandr Bazhenov told us about Russia’s experience in implementing PPP projects, the imperfect legal base and the essence of the new draft law.

Quite often essential infrastructure development projects can’t be funded with budgetary funds. A way out is to use public private partnership (PPP) mechanisms which allow us to raise private capital to fund socially significant projects. On Friday, the State Duma is to consider in the first reading a Draft Law “On Basics of Public Private Partnership in the RF” which will make it possible to form a legal framework for implementing PPP projects. Director of Vnesheconombank’s PPP Directorate Alexandr Bazhenov told Prime Agency about Russia’s experience in implementing PPP projects, the imperfect legal base and the essence of the new draft law.

- Russian PPP highway projects are familiar to many people. Are there any examples of using PPP mechanisms for developing communal and social infrastructure, implementing projects on territories comprehensive development? How positive is the experience gained?

- Our transport sector is the most advanced one in terms of using PPP. We don’t have as many highway projects as we would like to: two federal highways are being built on the basis of concession model, a number of projects were launched by State Company Avtodor under the procedures set forth by the regional legislation. A project to launch the second stage of the West High-Speed Diameter Road Construction was also launched. In such airports as Pulkovo, Sheremetjevo, Koltsovo, Kurumoch and such ports for example as Ust-Luga federal property assets are financed with budgetary funds and commercial assets are in parallel funded by private investors.

Communal infrastructure is the second important PPP market. Historically first PPP projects were fully completed in Moscow where a private investor, selected on the basis of tenders, designed sewage treatment plants, funded, constructed and maintained them for 12 years, covered its investments and transferred the plants into the ownership of the city. In the communal infrastructure sector about 25 million people are provided with water supply services by private operators which are lessees of municipal water supply and sewage networks. This is more than in Eastern Europe put together. One of the largest by the world’s standards projects aimed at developing water supply and sewage infrastructure of a whole agglomeration is being implemented in the Rostov region.

In the heat supply sector the situation is more intricate because local heat supply markets are formed on the basis of generating companies’ private assets and private owners of boiler houses as well as municipal boiler houses and networks. It is typical that where territorial generating companies manage to integrate local markets efficiency of operating infrastructure and quality of services improve. In this respect, PPP might give this sector a chance to speedily address problems associated with securing risks of long-term investing in infrastructure.

This is also the case in household solid waste management sector. There are examples of projects in household solid waste treatment in the Nizhny Novgorod region and the Volgograd region on concession terms. A project on the construction of a rubbish recycling complex in Saint Petersburg is coming up against a lot of problems. Given great demand from territories for creating an industrial base for waste collection and processing, implementation of investment projects on a commercial basis creates insurmountable difficulties: poor institutional regulation of this sector, an investor is not in a position to cover expenses on the construction of a rubbish processing plant because there are no recyclable waste processing plants, no tariffs for waste utilization, municipalities are not responsible for volumes and morphological composition of wastes sent for recycling because waste collection and removal activity is classified as a competitive line of business.

There are also successful projects aimed at developing engineering infrastructure for deploying new production facilities. For example, a project in the Kaluga region on the construction of auto cluster in which Vnesheconombank participates. More than 60 projects on the comprehensive development of territories are being implemented with parallel funding of infrastructure with financial resources from the Russian Investment Fund (the budget) and private funding of production facilities.

Social infrastructure is now being formed as the most actively developing market for PPP projects. In the Nizhny Novgorod region they built sport and fitness complexes on the concession terms, an Ice Palace - in Ulyanovsk, schools in Saint Petersburg. They have just conducted a tender in the Astrakhan region for the construction of 31 pre-school education institutions in 17 small population centers. Demand is being formed for such projects in the public healthcare sector. Of course if budgetary funding of federal education and healthcare programs is increased the authorities could reduce a level of activity on forming PPP projects. As far as regional and municipal authorities’ initiatives on using PPP are concerned, the situation has changed radically. The said PPP pilot projects on the construction of waste processing facilities in Moscow remained to be as such at that time and nobody followed this experience in the regions. But the current situation has changed for the better. The monitoring found more than 700 initiatives on launching PPP projects in various sectors controlled by the state and municipalities. In 64 Russian regions they followed Petersburg’s example passing regional laws on conditions for regions’ participation in PPP projects. This is undoubtedly a positive signal demonstrating that many authorities are actively involved in developing their territories rather than queuing humbly for budgetary funding.

As a whole we can say that expectations for using PPP actively, given quality regulatory and legal framework, have been formed. A Draft Law “On Basics of PPP in the Russian Federation” should support these expectations

- Can we say that PPP on the basis of concession agreements has been recognized as having no prospects?

- No, we can’t. Concession is a form of PPP which under applicable legislation provides for private investments in government or municipal assets and their recoupment through providing commercial services to consumers by a private investor.

About 500 concession agreements were registered in the country for the most part at a municipal level.

As far as the use of concessions for the construction of motorways is concerned the financial sector refused to give a vote of confidence to such model asking for significant amounts of government guarantees and capital grants to fund the Moscow-Petersburg Motorway project and the Odintsovo Bypass project. After that, transport workers initiated amendments that made it possible to form concession agreements based on accessibility payment model when the concessor pays to the concessionaire. For this model to be implemented, road funds have been resumed and are being used now. These funds’ formation depends on the transport activity.

Now the Regional Development Ministry wants to learn lessons from the Transport Ministry.  They are introducing a regulation in the law on water supply that provides for a possibility to engage private investors on concession terms only. So, recoupment is expected to be secured by tariff receipts, the growth of which is limited by consumers’ paying capacity. We can boost efficiency on a massive scale only through renewing fixed assets on a massive scale but it would be difficult to find investors who could assume commercial and institutional risks of housing and public utilities.

And how should we launch this model for public education and healthcare services infrastructure? And in the depth of the country? Even in Moscow with its great potential to cover non-budgetary investments, concessions are not developing. And in the depth of the country consumer demand is limited and electorate size is not big enough to prioritize budgetary financing.

In fact, all countries that started to use PPP actively followed the path of transport ministries.  Economic science shows that infrastructure development results in economic growth and increased incomes in the budgetary system. So countries that experimented with concessions through commercial recoupment took advantage of another model: the budget pays but private business is responsible for a project, construction, operation and maintenance.

- What can you say about Russian applicable legislation on PPP? Why is it imperfect? What complaints are being voiced?

- PPP is not a legal norm but an economic concept. So, strictly speaking there is no law on PPP as such. One of contractual form of PPP is regulated by the Federal Law “On Concession Agreements”. PPP development in the regions is based on contractual arrangements being formed as part of the Civil Code. Public partners assume obligations under the Budget Code, the Federal Law “On Competition”, the Land Code. So, PPP agreements are regulated by various laws and this results in certain contradictions with the new reality where the state becomes an investee in order to fulfill its obligations more efficiently. A new law should specify a single tender procedure that provides for the investor to assume obligations on investing in an asset, for the state to provide the investor with a plot of land for operation and for the investor to receive payments from authorities.  There is also a need to differentiate PPP projects from projects on the terms of government purchases. There is also a need to regulate relations between Russian constituent entities and municipalities.

- What problems are typical for the regional legal framework regulating PPP?

- In response to frequent complaints I would like to stress that regional laws do not specify  any new contractual arrangements instead of federal legislation, they specify conditions for RF regions’ participation in PPP projects associated with the aim of PPP projects, obligations to be assumed with established powers, tenders to select investors provided that a procedure for a specific contract is not set forth by a special law.

Saint Petersburg is the leader in best practices in PPP. Several years ago they passed a regional law on the city’s participation in PPP projects. They launched a whole portfolio of projects that created an absolutely new image of the city’s investment appeal.

Today, another 63 Russian regions passed laws on PPP. Their quality is quite different even if they originated from one and the same source. These laws are often of declarative nature. But this shouldn’t frighten us. We can improve the quality of a regional law upon preparing a specific project.

In order to improve regional legislation we need to regulate various parts of federal legislation as applied to PPP.

- What’s new in the draft law on PPP?  What limitations related to the imperfect legal framework does it remove?

- The draft law sets forth principles and criteria for classifying a project as a PPP one. It also specifies the scope of authority of the RF, a constituent entity and a municipality. The draft law determines the procedure for a tender to select a private investor. It also introduces necessary changes in the land, tax, budget codes and the law on competition.

- Are there any issues in the draft law needed to be finalized?

- The Federal Antimonopoly Service offers to add requirements for tender selection procedures and differentiate PPP subject matter from relations regulated by the law on government purchases. The Finance Ministry proposes to determine a procedure for forming spending obligations on PPP projects. The Russian Union of Industrialists and Entrepreneurs proposes to determine a procedure for initiating PPP projects by private investors. These are very constructive proposals. As far as the draft law is concerned, we are also interested in determining Vnesheconombank’s role in enhancing the PPP projects market (the authorities’ support for forming qualitative proposals concerning PPP projects).

- Does the draft law address the absence of the state’s long-term guarantees for private partners? What sort of mechanism could it be (insurance, guarantees from the budget)?

- The draft law stipulates that a public partner can assume obligations under a long-term agreement.  Fulfillment of a number of these obligations is specified by the budgetary code. In the case that a public partner fails to fulfill its obligations a private partner can to seek judicial decision and obtain appropriate compensation.

A number of obligations are designed to take certain actions to enable a private investor to fulfill its obligations. In the case that a public partner fails to act, it’s not possible at the moment to secure judicial decision to force it to fulfill such obligations.

- The Federal Antimonopoly Service (FAS) fears that if the state’s and municipal assets are not distributed by way conducting auctions, it is bound to eliminate equal opportunities for gaining access to these assets and limit competition. FAS also believes that the fact that PPP agreements are not regulated by the law on placement of orders and that budgetary funds can be spent under appropriate agreements would make it a lot more difficult for  natural and legal entities  to participate in legal relations under consideration and would create advantages for some economic entities acting as private partners and generate a potential for corruption. How high are these risks for investors?

- PPP is not privatization because a private partner creates assets in the interests of a public partner.  As far as PPP projects are concerned, property is not expected to be transferred from a public partner to a private one.

PPP is not a procurement because a risk of raising financing and creating an asset through using non-budgetary funds rests with a private partner. Procurement provides for making payments to a contractor (seller) using budgetary funds and in case of creating an asset – advance payments prior to construction. Tenders for the right to conclude PPP agreements do not limit private sector’s opportunity to participate in them as these procedures do not provide for any limitations or discriminatory factors. All algorithms will be specified in detail in regional laws. Closed tenders can be conducted only in cases provided for by the law on state secrets. This is in line with established practice in the country and regarded as being absolutely normal.

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Vnesheconombank Chairman V.A. Dmitriev’s Interview to the TV Channel Russia 24

22 april 2013 года
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TV Channel Russia 24,
INTERVIEW
22.04.2013, 16:37

HOST: Vladimir Alexandrovich, good afternoon.

Vladimir DMITRIEV, Vnesheconombank Chairman: Good afternoon.

HOST: We are seeing each other in Washington in the course of the G20 meeting. Russia is a chairman of the G20 and one of its main tasks is to fund investments. I know that now VEB is opening its subdivision in Hong-Kong to raise Asian investments to fund Russian projects. Could you tell about your Asian subsidiary’s functions, are there any preliminary agreements, projects, key lines of activity?

Vladimir DMITRIEV: In fact, Vnesheconombank’s Supervisory Board made a decision to open a financial and investment company in Hong-Kong. This Vnesheconombank’s company is designed to both raise investments and safeguard Russian companies’ interests on the Hon-Kong stock exchange, provide consulting services, help Russian companies to tap international financial markets and raise foreign investments for Russia. This is one of its main missions.  We also have other priorities related to a growing trade turnover between Russia and China and using Hong-Kong as a sort of bridge for raising investments for Russia. But this is not the only institution designed to raise investments as part of Vnesheconombank. And we talked about it with our colleagues from national development finance institutions as well as with the leadership of such international development finance institutions as the World Bank, international finance corporations, the European Investment Bank and others. They of course want investments for Russia to be channeled through institutions controlled by the state and they regard these institutions as an instrument for guaranteeing and sharing risks with them and securing success of their investment transactions in Russia. I would also like to highlight the Russian Direct Investment Fund’s successful activity as an institution included in Vnesheconombank Group and responsible for raising investments. My high opinion about this Fund is shared by our county’s leadership.

HOST: What projects were implemented successfully?

Vladimir Dmitriev: The Fund’s financial resources in the amount of 500 million dollars made it possible to raise foreign investments worth 2 billion dollars. Sectors that are most attractive for foreign investors are those associated with our country’s dynamically developing middle class. Here I mean our financial sector, the Moscow Interbank Currency Exchange, public health services, medical industry, pharmaceutical industry, timber processing industry and a number of other sectors which are attractive for foreign investors who wouldn’t invest in Russia in the absence of a reliable mechanism represented by the Russian Direct Investment Fund. The Fund’s objective is to identify projects that could be of interest for foreign investors.

I’d like also to mention regional funds and corporations established specially for raising investments, for example the Kaluga Development Corporation. Just seven years ago the suburbs of Kaluga were nothing more than marshy lands no one wanted. Nowadays a unique industrial cluster was set up on these territories due to developing infrastructure by this corporation whose shareholders are Vnesheconombank and the Government of the Kaluga region. In this industrial cluster they manufacture Volkswagen cars, localized spare parts production, develop small and medium-sized enterprises and cooperate with other giants of automotive industry and electronics. This is an example showing that through infrastructure development and support provided by the regional authorities and the national bank for development Russia’s economy and regions became attractive for investors. Similar activities are undertaken by the North Caucasus Development Corporation implementing a whole number of interesting projects in the Caucasus as well as by the Far East and the Baikal Region Development Corporation whose mission is likely to be expanded and it will be able to participate in structuring projects based on concessions and principles of public private partnership. As far as raising investments for Russia is concerned, our contacts with national development institutions and international development institutions showed that Russia is attractive in terms of investments. Statements by Elvira Nabiulina and the current head of the Central Bank suggest that the state is obviously interested in looking for opportunities to co-invest in projects which are of interest for foreigners.

HOST: You’ve mentioned Elvira Nabiulina’s initiatives, do you mean her latest statement that we can invest revenues from oil and gas exports, that is, from the National Wealth Fund in projects with the participation of the Russian Direct Investment Fund?

Vladimir DMITRIEV: We should talk about projects that could be attractive for foreign investors. It’s not a matter above all of investing financial resources of the National Wealth Fund at a good profit rate, although it’s an important goal in itself. Our objective above all is to broaden Russia’s investment appeal, for foreign investors to believe in the state’s readiness to co-invest in projects that are of interest for foreign investors in the context of activities undertaken by the Finance Ministry, G20 financial institutions and our presidency in this prestigious international association. Vnesheconombank put forward an initiative to hold a conference or a meeting of national and international development institutions’ on the sidelines of G20 countries finance ministers’ meeting in July of this year. Here I mean above all such our partners as the China State Development Bank, Germany’s Development Bank – KfW, development banks of BRICS countries and a number of European development institutions. Moreover, international financing institutions and international finance corporation showed interest in participating in this forum, for example the European Investment Bank and the European Bank of Reconstruction and Development. They are interested in discussing how national and international development institutions can achieve an objective on the agenda of a G20 meeting to be held in Saint Petersburg in autumn – this objective is to secure economic growth to create new jobs and increase employment.

HOST: How in general VEB and the Russian Direct Investment Fund cooperate with other international financing institutions and foreign national development banks?

Vladimir DMITRIEV: So far the Russian Direct Investment Fund has been working with private and sovereign direct investment funds rather than banks. And in this respect, the Fund has achieved a lot: it set up a joint fund with the China Investment Corporation, engaged Kuwait’s sovereign fund in the amount of half a billion dollars for co-financing projects proposed by the Russian Direct Investment Fund. Today we can see that both European national banks and international financing institutions such as for example the European Investment Bank are interested in discussing their potential participation in projects to be co-financed with the use of the Russian Direct Investment Fund’s financial resources. Our foreign partners trust Russia and are ready to invest in it and this is confirmed by the fact that Vnesheconombank together with Germany’s development bank established a major fund to provide support for small and medium-sized enterprises in Russia. The Fund is designed to enter into capital of companies operating in the high-technology sector. We have preliminary arrangements with other international financing organizations and private investors, private investment funds for them to enter the Fund or to co-invest projects to be identified by us with our German partners. This Fund is already functioning. It was created jointly by Vnesheconombank, the International Finance Corporation and the Russian Finance Ministry – the Fund to Support Regional Banks. It has already conducted two transactions where the Fund entered into capital of regional banks thus increasing their capitalization and ensuring that these banks’ loan portfolio is in the first place used to support small and medium-sized enterprises in the high-technology sector.

HOST: If we talk about BRICS, this subject is also being discussed and recently they have been voicing an opinion that the abbreviation itself has become outdated. Do you think that BRICS has a potential in particular with regard to a BRICS Development Bank project which has been hindered lately.

Vladimir DMITRIEV: To tell you the truth, I’m among those financiers who have a conservative approach to this idea. Neither Vnesheconombank nor BRICS countries’ development banks have been engaged for this project. An association of BRICS countries’ development banks has been set up in our country. This activity is being undertaken at a political level, at a level of finance ministries. But the states could instruct their national financial development institutions to participate in this sort of activity and instead of contributing 50 billion to capital of a BRICS Development Bank it would be better to contribute 2 billion to each of national development banks and each bank would be able to raise at least 15 and may be 20 billion on the market taking into capital adequacy ratio thus forming a significant capital base that would make it possible to fund appropriate infrastructure projects. The most important thing is to identify these projects but this is not our responsibility. If we mean projects that are of interest for all BRICS member countries, appropriate ministries of transportation, economics and industry should be involved in identifying these projects, set a task for us and we’ll be responsible for structuring these projects financially, searching for financial resources to fund them and for financing them. Nobody has answered this question so far. So, I don’t think that this bank will be established in the near future.

HOST: Vladimir Alexandrovich, thank you very much for answering our questions.

Vladimir DMITRIEV: Thank you for interesting questions.

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Chief of Finance

15 april 2013 года
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ITOGI №15 (879)
April 15, 2013
Andrei Vandenko

 

Vladimir Dmitriev about a gloomy parting with his motherland and a bright encounter with capitalism, about pink salmons he exchanged for dried Caspian roaches, sleepless nights spent in an embassy garage and about oligarchs queuing in a reception office as well as about how such words as VEB coupon bonds ceased to be dirty ones

Chairman of State Corporation ‘Bank for Development and Foreign Economic Affairs’ commonly known by force of habit as Vnesheconombank, Vladimir Dmitriev, is a rare guest in the mass media. And his interview on subjects not dealing with his professional core activity is an out of the ordinary event. For this sort of event to happen we had to take patience as you need time for a detailed talk, and time is traditionally in short supply. Nevertheless, we were able to talk and we talked for more than four hours.

- We are supposed to talk with Vladimir Dmitriev about money – someone else’s and his own money as he is a banker. Could you tell us where you made your first money?

- In a student construction team, after the third year of studies we worked on Sakhalin and returned to Moscow overloaded with red salmon. Now my Alma Mater – the Moscow Finance University- occupies a lot of buildings but in the past everything was housed in a typical five-storied school building on Kibalchich street. On the first of September after classes we went to a pub near the exhibition of economic achievements (VDNKh) and exchanged pink salmons which were in short supply for dried Caspian roaches. We ate too much salmon on Sakhalin. In the film the White Sun of the Desert Vereshchagin said, “You again give me this caviar. I cannot have this damn stuff every day.” We were in the similar situation. During the fishing period you could see barrels of salted red salmon everywhere – you could eat until you bust. I spent the whole summer on Sakhalin. I passed exams ahead of schedule and participated in preparing living quarters for members of our construction team. As a member of a student construction team I worked in three places – in the Moscow region, Abakan and finally in the Far East. The current generation of students does not have a chance to go through this sort of experience but we gained invaluable experience and it proved to be very useful for us later on. After the ninth grade I worked as a turner at a plant. And when I was a fifth year student, I worked from September to June as a loader at a machine-building plant “Znamya Truda” which is now incorporated in RSK Mig. We worked nights loading repaired aircraft on auto-platforms. And then we transported them to Lukhovitsy and handed over planes to the military. I made good money. That was the year 1975 and at that time an engineer earned about 130 rubles a month and I was paid two hundred…

- But you earned a lot less than Prokhorov. In his student years he organized cargo-handling operations, created work teams and made loads of money.

- To my best knowledge, Prokhorov accumulated significant capital in a jeans cooperative business. But he did it later, in 1975 that I am now talking about they were cracking down on cooperative businesses and shady businessmen. There were some who competed with Zarya firm that provided household services. Some accumulated fortunes in gambling business. They could win a million rubles a month playing cards and the Volga car cost ten thousand… They did not deposit such huge money in savings banks. They hid it in the earth in cellophane sacks.

- Did you happen to know this sort of people?

- They have been doing fine so far although they had to work hard to become successful and wealthy.

- But you haven’t told us yet about when you earned on your own a significant sum of money?

- During that summer on Sakhalin. I was paid a thousand and a half rubles. I bought a tape recorder “Mayak” and carried it through the whole country. I also bought ten kilos of pink salmon. On our way to Moscow we changed planes and because of bad weather we had to spend 24 hours in Khabarovsk. Our student construction team coats bore the following abbreviation - MFI – the Moscow Finance Institute. When asked, “Where are you from guys?” We answered, “The Magadan Faience Institute.” We were just kidding. Surprisingly, but many believed us.

- Why did you decide to become a financier?

- I’ve been trying to answer this question myself so far. My parents didn’t have anything to do with this line of business. They were 14 years old when they started to work at “Znamya Truda” plant, where I worked being a fifth year student. My father worked there sixty years and graduated from an aviation institute while working. He retired from the post of deputy technical director of the plant. He died two years ago…My mother didn’t work as long as my father although she devoted all her life to the plant. I was supposed to follow my parents’ path but I turned out to be good at humanities and foreign languages. And I had made a choice by the tenth grade. I tried to get enrolled in MGIMO (the Moscow State Institute of International Relations) but I failed to pass a maths exam, submitted my document to the Finance Institute, passed exams and became a student. Everything proved to be for the better. Today I am head of the Department of the Finance University and I’m a member of MGIMO’s Board of Trustees , I worked for ten years as a diplomat abroad, I worked several years in the Foreign Ministry and the State Committee of the USSR Council of Ministers for Foreign Economic Ties…

- You started to work for the Foreign Ministry in 1979.

- Yes, I did, due to relatives’ ties. But before that I had gained some experience working for the State Committee and I earned a good reputation there.

- Could you tell us a bit more about your relatives’ ties?

- That man is not alive and let’s not take his name in vain but it was he who helped me to move from foreign economic activity to foreign political one. I became an attaché in the Foreign Ministry’s Department of Scandinavian Countries. I worked for two years in the high-rise building on Smolensk square, on the 16th floor and I left for Sweden in 1981. My weeping relatives were seeing my wife, my little son and me off at the Belorussian railway station on January 31, at seven p.m. It was snowing and raining. And to tell you the truth, we found it hard to imagine what we would see when we reached our destination. Our train traveled to Stockholm through Germany. To be more exact, it was loaded on a ferry in Germany’s Sassnitz and taken to Sweden’s Trelleborg and then to the capital. It was a wonderful voyage for us as we had never been abroad before. While we were traveling through Poland the landscape was rather gloomy - the same patches of snow in the fields and low clouds. We saw Polish people walking in the carriages and offered us to exchange Stolichnaya vodka for chewing gums and blades for safety razors. Our train arrived in Germany in the evening and was being loaded on a ferry in the dark. After waking up the next morning we went up to the deck. The contrast was striking. The ferry was sailing in the skerries moving between small islands. After two days of winter gloomy weather we suddenly saw a cloudless blue sky and the bright sun, well-tended green lawns on the coast, yellow and blue flags over roofs. That was a country that had not seen a war on its territory for a hundred and seventy years and had been ruled but social democrats in the recent decades. Comparisons rushed into my mind… Then I started to work and the first emotions became less acute.

- How long did you stay in ABBA’s motherland?

- My first duty station lasted four and a half years, from 1985 to 1987 I was in Russia and then I returned to Stockholm to work there for another five and a half years. During the time I was in Moscow I became a post graduate student but I defended my thesis only in 1998 while working for Vnesheconombank.

- Did you happen to meet legendary diplomat Andrei Gromyko?

- Once Andrei Gromyko arrived in Stockholm to participate in a disarmament conference and held talks with US Secretary of State George Shultz. The talks lasted for about five or six hours and Andrei Gromyko didn’t leave a negotiating table, not even once. I also remember that he brought a cook with him and entertained Americans with pies. And one more thing: after the lengthy and rather tiring talks that ended at about midnight Gromyko’s interpreter Viktor Sukhodrev transcribed his notes and dictated them to typists who worked interchangeably till five o’clock in the morning. These people are known for their great capacity to work tirelessly and high professionalism. Only such people were employed in the Foreign Ministry, selection was rigorous.

- Did you meet Sergei Ivanov in Stockholm?

- During my duty station, he didn’t work there. I met him at the Foreign Ministry. In Stockholm I worked with Konstantin Kosachev who is now Head of the Federal Agency for CIS Affairs, Compatriots Living Abroad and Humanitarian Cooperation, Vladimir Titov, Deputy Foreign Minister. I can also cite Grigory Rapotu – State Secretary of the Union State of Russia and Belarus. Putin’s assistant Yury Ushakov worked in the eighties at the disarmament conference in Stockholm. I‘m still on friendly terms with many people I met in those years. We share our past experiences both serious and comical ones.

For example, many Soviet citizens who worked abroad became enthusiastic about going fishing and picking up mushrooms. In 1982, our submarine went aground in the skerries, spy scare rose dramatically, we were being spied on openly, our every step was monitored. At dawn we went fishing in inflatable boats in the gulf, we used to catch codfish, roaches and with luck eels and salmons. Swedish journalists took pictures of us from the coast and then published articles saying that in fact Russians measured the depth of skerries for Soviet mini-submarines passage. But who could have believed that we used our catch to cook home delicacies?  For example, we salted fish in baths and dried it in vent air inlets. The smell of dried fish spread all over the embassy. And would you like me to tell you what we tended to do at night in the embassy’s garage? We acquired car mechanic skills repairing used cars before taking them home. We used to buy shabby cars on the cheap, riveted, welded, puttied and painted them until they looked like new foreign–made cars. In the late eighties you could buy a ten-year-old Mercedes on the cheap, repair it and exchange it in Moscow for a three-room flat. A three-room flat!

- Did you do so?

- What for? And I did not have a Mercedes. In 1993, I brought home 1979 Volvo 244. I used the car for some time and in 1995 I had a power of attorney to transfer the car issued. Paradoxically, the car is still registered in my name and is entered in a tax return although I think that the car does not exist anymore and was utilized long ago.

- Who else did you work with in Stockholm? Did you have a chance to meet Gorbachev?

- Mikhail Gorbachev visited Sweden in 1990 after he had been awarded the Noble Prize for Peace. Despite his triumph he looked tired and answered questions in an absent-minded way. I even thought that he felt that his active political career was coming to an end. He was accompanied by interpreter Pavel Palazhchenko who several years later translated Victor Chernomyrdin’s saying from Russian into English brilliantly. The saying runs: “We wanted the best, you know the rest.”

I happened to see various patterns of behavior. When I started working in Stockholm, Mikhail Yakovlev was the Soviet ambassador to Sweden and had spent about eleven years in Sweden by that time. He addressed the local audience in one and the same way: he used to say hello in Swedish and gave his place to an interpreter who read out his speech without stopping from the beginning to the end. At the end he used to say in Swedish Tack sa mycket - thank you very much and left. Thus, he saved time of those present as they didn’t have to listen to his speech in Russian. Under Boris Pankin they made it a rule to read out the latest Swedish newspapers. He made all members of our diplomatic mission to attend those newspaper readings. We got together in the morning at 9 o’clock and listened to a review of leading publications. I was responsible for a conservative newspaper Sveska Dagbladet. But Boris Pankin was the first to speak. The latest copy of newspaper Pravda was delivered by the first morning flight of Aeroflot and he read out a leading article to us.

- But in August 1991, he denounced GKChP (The State Committee on the State of Emergency) and Gorbachev appointed him as Foreign Minister of the USSR without delay.

- He served as Foreign Minister for a short period of time - about a hundred days. Then he served as ambassador to Great Britain.  Now he lives in Sweden. Such interesting twists of fate…

- You returned from your second Stockholm duty station in 1993 but decided against working in the Foreign Ministry. Why?

- When I came back to Moscow I could see that people working at the Foreign Ministry were also involved in selling containers of American cigarettes and Dutch spirit and accumulated fortunes. Not all people were involved in such business but the atmosphere was rather unfavorable. The best experts started to leave the Ministry. A colleague I worked with in Stockholm decided to go into politics and joined the Party of Russian Unity and Accord which was preparing for State Duma elections. He was offered a job in the Finance Ministry but the prospect for becoming a deputy seemed to be more attractive to him. He got involved in the election campaign and recommended me to the Finance Ministry as we were friends. I accepted an offer and worked as deputy head of currency department where I was involved in issuing VEB currency-denominated coupon bonds. In 1995, I moved to the foreign debt department and was responsible for exercising control over Russia’s first sovereign placement of bonds on the Eurobonds market. At that time I could not imagine that I would work as VEB first deputy chairman…

- Did Andrei Kostin offer you this job?

- We first met in 1993 in the company of former Foreign Ministry employees. And in 1997, Andrei who at that time was already Chairman of Vnesheconombank insisted that I should become his deputy and secured my appointment. To tell you the truth, first deputy finance minister Andrei Vavilov did not want to allow me to leave the Ministry for a long time. We travelled with him all over the world staging road shows devoted to placing Russian eurobonds in various countries and cities. Once I made around the world business tip during a week: I flew to Tokyo and talked with Japanese bankers, in the evening I made a presentation in Seoul, I arrived in Hong-Kong in the morning and from there I flew to Los-Angeles, in the course of three days I visited San-Francisco, Boston, Chicago, Minneapolis, New-York and came back to Moscow. Last eurobonds with my participation were placed in 1997 and I believed that I had fulfilled all obligations and had the right to start working for Vnesheconombank. And so I did. This line of business was familiar to me as Vnesheconombank was at that time responsible for managing Russia’s foreign debt. VEB retains this function now but to a much lesser degree. The former debt agency transformed into a full-fledged Bank for Development.

- The country saw a default soon after which you were by a strange coincidence awarded the Medal of the Order “For the Merits and Dedicated Service to the Country”.

- As you can guess the award does not have anything to do with the sad events in August. I was awarded in connection with VEB’s anniversary. And in the summer of 1998, we of course understood what might happen.

- You mean that such words as VEB coupon bonds became dirty ones.

- Naturally, for the reason that the bonds depreciated. Russia not only announced default but the Government resigned, there was a serious confrontation with the State Duma and at some point, a question of where a decision-making center really was, came up. The situation in the political and everyday life was extremely volatile.

I remember a funny episode. My colleagues and I decided to have lunch and discuss the current situation. We went to Shanghai restaurant which was housed in the now demolished Rossiya Hotel. By the way, it was a wonderful restaurant with amazing cuisine. We sat there talking and eating with pleasure for about two hours and when the time came to pay the bill a waiter said, “I’m sorry, we do not accept bank cards.” The reason was the unstable financial situation. We offered ready dollars. A headwaiter came up and said, “I’m sorry we do not accept foreign exchange either. The exchange rate is changing all the time and we would have problems upon cash collection.” The episode was a clear indication of what was happening in the country…

There were unending talks about forward deals. As a matter of fact, foreign market players were involved in purchasing GKOs (government short-term bonds), assumed currency risks which they hedged in Russian banks but later on when they fell upon hard times they rushed to us shouting, “Help us out!” We asked them reasonably, “Are you responsible businessmen?” Their answer was, “We’ve been set up.” Thankfully, we survived both the default and the crisis. We proved to be better prepared for this challenge – we were experienced enough, and it was even more important that the state responded promptly by taking strategic decisions. In 1998, the country was in chaos and its economy was paralyzed. Many reasonable schemes were offered but they were rejected because those who were supposed to take responsibility were frightened and narrow-minded. For example, to say that the value of Russian debts fell at that time means to say nothing. Western banks made the following offer, “Let us hedge our risks through your Central Bank and in return we’ll provide you with financial resources to buy out devalued Russian debts.” It was a good bargain in all respects! This was the only way they could help us, but we announced default and any limits for Russia were cut off. And money was available abroad in any quantity. But proposals were rejected, nobody wanted to run risks and take decisions…

- Nevertheless, at a critical juncture the Central Bank provided Vnesheconombank with fifty billion dollars from its gold and foreign currency reserves to refinance foreign debts of Russian companies and banks.

- A limit was set for us but we spent a bit more than eleven billion. It was an interesting time.

- I hear that oligarchs queued day and night in your reception office. As the story goes, “Don’t join the queue! I’m the last one.”

- To say so would be an exaggeration but there were many who wanted to receive credits. VEB worked in close contact with the inter-departmental commission comprised of representatives from the government, governmental agencies, law enforcement authorities and commercial banks. Upon making decisions in the course of meetings we took into consideration all factors and circumstances, all small details and we also worked out well-defined criteria.

- Nevertheless, Oleg Deripaska received the biggest sum.

- You are right if you mean four and a half billion dollars. Rusal’s structures were provided with the largest financial assistance and it was not that a special favor was done for somebody personally. Nornickel’s blocking stake was pledged against the loans. There was a real threat to lose assets that played a key role for the Russian Federation; these assets could have been alienated by foreign creditors. We did not try to please everybody; we acted on the assumption that for some people financial support was vital while others were driven by the desire to resolve their problems on the sly. If people ran into debts thoughtlessly and didn’t give a damn about how they would repay them, why should the state help them out? There isn’t enough money for all. At that time, we worked without days off – on Saturdays and Sundays, sometimes stayed day and night at the office. We tried to work as fast as possible and managed to sort through a great number of documents for all decisions submitted to the Commission and the Supervisory Board to be well balanced and well motivated. Key decisions were made with the participation of the then Prime Minister Vladimir Putin who headed VEB’s Supervisory Board.

 -How did the idea of establishing a Bank for Development come about?

- I became Chairman of Vnesheconombank in late May of 2004. By that time, they had been talking about Vnesheconombank’s future for several years. Various scenarios were offered. It was clear that the Bank couldn’t perform its old functions any longer. By the way, you know that until the year 2007 its official name was Vnesheconombank of the USSR. The Soviet Union did not exist anymore but the brand remained. We didn’t even have a Central Bank license. The anecdotal situation was a real obstacle to our work. Finance Minister Alexei Kudrin encouraged me with good words when I was appointed as Chairman of Vnesheconombank telling me to prepare for transforming the Bank into a debt agency. We had a long conversion that time because I had a different opinion about VEB’s prospects. I’d like to explain what I mean.

In the early and mid 2000s, commercial banks tended to fund projects with a payback period of 1-1.5 years. And interest rates were very high. Large companies received credits for an acceptable period of time against security of their export earnings. The country’s infrastructure was being modernized slowly on a leftover principle. In actual fact, they hadn’t been building new sea ports, shipyards, airport terminals and nuclear and hydro power engineering facilities since the Soviet times. The economy was in great need of a long-term investment institution. The state needed a bank capable of raising substantial financial resources to extend long-term credits to fund infrastructure and large-scale projects. And such a bank was not supposed to give absolute priority to generating profits.

- Did you suggest this idea to Vladimir Putin? Had you known him for a long time?

- My colleagues and I had formulated a concept for a Bank for Development by 2005. And I suggested this idea to the then Head of the Kremlin Administration Dmitry Medvedev. He supported me and reported to Vladimir Putin. Then I had a meeting with the President who approved the project. Economic Development and Trade Minister German Gref assisted us in establishing a Bank for Development from the very beginning. He had VEB exempted from profit tax. We also put up a united front when taking other decisions vital for the Bank. The then Prime Minister Mikhail Fradkov’s role was exceptional. Nevertheless, we also had serious opponents. We had to come up against the failure to understand us and active opposition. Some believed that there was no need to create another major state bank capable of competing against commercial banks. Some were driven with selfish interests. In the long run, we managed to overcome all the differences.

- Did you take on Mikhail Fradkov’ son to thank him for his support?

- Petr Fradkov worked in VEB in the early 2000s, he had done a training course for half a year in Italy long before Mikhail Fradkov was appointed Russia’s Prime Minister and we planned to appoint him as our Bank’s representative in the U.S. He worked for about two years at the Far-East Shipping Company and then returned to VEB. Petr is ours. Alexandr Ivanov – a son of the current Chief of Staff of the Presidential Administration also worked for VEB, then left VEB to work for VTB and returned to our Bank again irrespective of Sergei Ivanov’s career progression. Frankly speaking, there are more attractive financing institutions than VEB whose employees’ salaries are a lot lower than those in banks with the state’s participation and obviously in private commercial banks.

- Did you help your sons to find a job?

- They are sensitive on such matters but they listen to my recommendations. My elder son Pavel is a member of CREDIT AGRICOLE BANK Board here in Moscow, my son Stepan has been working for the second year now in an investment company. They both graduated from the Finance Academy. They are fluent in English and didn’t forget Swedish completely. It’s too early for my little ones to think about their career. My daughter Zhenya is going to school this year, my youngest son Lesha is not five yet.

- How is your Swedish?

- I try to maintain a working knowledge of Swedish. Thanks to Sergei Ivanov I’m the Co-Chairman of the Russian-Swedish Business Council and I have regular meetings with my vis-a-vis Hans Vestberg, the current CEO of Ericsson. We speak Swedish with each other. I like the Swedish language and I like Sweden. Actually, the first love never fades away.

- How did you come to love hockey?

- When I was a boy we played with tin cans in the yard. We had neither pucks nor hockey sticks. We lived in 2nd Khutorskaya street until 1974 next to Dynamo stadium. We occupied a room in a five-storied building. In winter, I went to the stadium with neighbor boys to watch ice hockey matches. There were no indoor sports palaces at the time and all matches were played outdoors. If someone broke a hockey stick we had to repair it and use again. We had skates called “Gagi”, the word might have originated from the Dutch city of the Hague. There were also Canadian skates but we viewed them as an unaffordable luxury. We made leg guards from fruit and vegetable boxes, lined them with plastic foam and used tins as knee pads. I got a scar on my face when I fell on a tin can puck at the age of 13.

- What hockey team do you support?

- I have supported CSKA (the Central Sports Army Club) all my life. I have friendly ties with CSKA hockey veterans. Once we considered providing sponsor assistance to CSKA hockey team. At present, the Bank does not provide financial support for individual teams but we invest significant funds in Russia’s national football, ice-hockey, volleyball, swimming and rowing teams. We also fund the construction of several Olympic facilities in Sochi. When I was in Sweden I fell for tennis. In the early 1980s, Bjorn Borg’s glittering career was coming to an end but Mats Willander and Stephan Edberg were at the height of their success. There was an excellent ground tennis court in our embassy where we played recklessly from April to October. Since I returned to Moscow I have been working out regularly as well as taking part in amateur tournaments. In the past three years VEB has been staging a tournament under the motto “Tennis Legends in Moscow”. Last year Bjorn Borg, Goran Ivanishevich, Marat Safin, Evgeny Kafelnikov, Martina Hingis and Elena Dementieva participated in it. Professionals played with amateurs. It’s cool when you play against great tennis players…

- Can you tolerate defeat?

- Yes I can. But I get angry when rules are broken both in sports and in business. Fortunately, this is not the case at VEB. We have a very strong team in terms of professionalism and human qualities. I enjoy being in charge of such a team very much although it’s a great responsibility.

- Did you have to reshuffle the team significantly?

- I didn’t have to do it at all. First, I have been with VEB since 1997 and I have known all employees for a long time, I invited some of them myself. As a chief executive I believe that for a team to work efficiently it should be stable. As opposed to mathematics in business - changing the order of addends changes the sum. Corporative spirit is not an empty word for me. Strange as it may appear, there is still an atmosphere of the Soviet times at the Bank, in the best sense of the word. Responsibility, efficiency and discipline are our criteria.

- Nevertheless, one of your deputies is under investigation.

- If Anatoly Ballo is a point in case, I’m sure that investigators will look into this case in the most detailed and impartial way. No damage was done to the Bank, the credit was repaid and criminal cases against some suspects are already closed. We are committed to the presumption of innocence and we should not pin labels on anybody. We are going to cooperate with the investigation and support Anatoly. It’s very important for him and for our team as a whole. In any situation we should behave honestly and decently for us to live easily and comfortably. We receive some qualities from our parents. My mother is 84 years old; she has lived the better part of her life but her nicety in the matters of honor keeps on amazing my brother and I. She is very conscientious and pathologically modest. She is a decent role model.

- Are these qualities compatible with a banker profession?

- I for one don’t see any contradictions.

- Are there any real bankers in Russia? In Russia state-run banks rather than private ones enjoy the highest ratings. So, state bankers are in the lead.

- Strange as it may seem but we had an excellent finance training in the USSR even in the sever conditions of centrally planned economy. We had to retrain ourselves later on using our own experience and the experience was unique. And now we have highly qualified specialists in the Central Bank and commercial banks. But the highest ratings are not accidental.

- You’ve mentioned your brother. What does he do?

-Alexandr is ten years my senior and he works for the United Aircraft Construction Corporation.

- I see. You’re the Board Chairman there.

- Yes, I am. My brother already worked for the Corporation when I came there, he continued our family’s dynasty. He did what my parents expected of me. He graduated from an aviation institute and has worked in the aviation industry all his life. I go aboard a plane only as a passenger. I have to fly very often and spend half a year in business trips.

- Have you ever wanted to pilot a plane?

- No, I haven’t. I understand that this is not to be trifled. I’m too pressed for time to do a flying course. You have to learn to fly a plane in the best possible way not to risk your and other people’s lives. Otherwise, it’s not worth starting at all. I prefer to spend two spare hours on a tennis court or play ice hockey. But frankly speaking, most often I tend to work rather than play. I’ve been living this way a long time. I don’t complain. On the contrary I like it. I have a lot of work to do and a great number of plans. And it can’t be the other way round at the Bank for Development.

CV

Vladimir A Dmitriev

  • Born August 25, 1953, in Moscow.
  • In 1975, graduated from the Moscow Finance Institute, specialty — “International Economic Relations”.
  • 1975—1979 — State Committee of USSR Council of Ministers for Foreign Economic Relations, engineer.
  • 1979—1986 — Attache, third secretary, USSR Foreign Ministry Department.
  • 1986—1987 — Institute of World Economics and International Relations, USSR Academy of Sciences, research worker.
  • 1987—1993 — USSR Embassy of USSR in Sweden , Second, First Secretary.
  • 1993—1997 — Deputy Chief Executive Officer, Russian Finance Ministry Department.
  • 1997—2002 — Bank for Foreign Economic Affairs of the USSR, First Deputy Chairman.
  • 2002—2004 — Bank for Foreign Trade of the USSR (OJSC), Deputy President — Chairman of the Board
  • 2004—2007 — Bank for Foreign Economic Affairs of the USSR, Chairman.
  • From June 2007 — State Corporation “Bank for Development and Foreign Economic Affairs (Vnesheconombank)”, Chairman.
  • Doctor of Economics.
  • Corresponding member, Russian Academy of Natural Sciences.
  • He was awarded orders and medals of the Russian Federation as well as state decorations of a number of foreign countries.
  • Married. Has three sons and a daughter
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