HOST: We are again getting back to Sochi where the 13th International Investment is undeway. Now it’s my colleague Alexei Bobrovsky’s turn to speak.

Alexei BOBROVSKYlexeiBOBROVSKYhis cooperation task.s stable is advancing rapidly.tegyecte raised billions o dollars cludes Vnesheconombank an: I’m glad to welcome in our studio Vnesheconombank Chairman Vladimir Dmitriev. Vladimir Alexandrovich thank you for finding time to visit us. I’d like to start with the news that is being discussed by very many people but not so many understand why it is so important. It became known that VEB hoped for an additional capitalization worth 100 billion rubles in 2015and everybody started to talk that VEB had some problems. But not all know that VEB is not a purely commercial bank, it is above all a development institution which is forced to operate in line with commercial banks’ principles. What’s the reason for it? Maybe, you’llexplain it clearly?

Vladimir DMITRIEV, Vnesheconombank Chairman: You’ve got to the heart of the matter right away. We are not a commercial bank and we are not a public company, which places its shares on the markets and increases its capital. Sources of our capitalization are budgetary funds as we are a state corporation and we are owned by the state. In our capacity of a bank for development, we must rebuild our capital base for us to be in line with Basel standards and those of the Central Bank. A key standard for us now is capital adequacy ratio, which is supposed to be at least 10%. So, when we are speaking about our new strategy, about our increased loan portfolio and expanded investment activity we naturally raise the question of increasing our capital for us to follow required sustainability standards.

Alexei BOBROVSKY: You don’t have to do it in 2014, you need to do it in 2015.

Vladimir DMITRIEV: Thankfully, we have addressed this problem in 2014 by way of converting deposits of the National Wealth Fund into tier 2 capital. This transaction will be closed in a day or two. As a whole, we are grateful both to the Government and the Finance Ministry for their assistance in resolving this problem. Despite the difficult global situation, we set ourselves ambitious tasks of increasing our influence on the country’s economy and its development.There is no doubt that an issue of our capitalization is of overriding importance.

Alexei BOBROVSKY: Is VEB going to change its strategy in the situation of sanctions? It goes withoutsaying, that a development institution should above all invest in the projects that are needed by the state and should not focus on return on investment. Nevertheless, my understanding is that Western markets are closed and you have to think how to earn money – even on a small scale. Do you have to think about changing your strategy?

Vladimir DMITRIEV: We are submitting a new strategy to our Supervisory Board because our former strategy until the year 2015has been already fulfilled this year. So, we raise the question of approving a new strategy. But despite the worsening of the geopolitical and economic situation we deem it necessary to develop in a sustainable way. So, we propose to approve a new strategy which provides for increasing our loan portfolio to 2.5-3 trillion rubles until the year 2020 as well as for increasing our participation in providing support for industrial exports to 550 billion rubles. This support includes guarantee assistance as well as support by way of providing credit facilities and support for small and medium-sized enterprises – Vnesheconombank’s key lines of activity.

Alexei BOBROVSKY: And not only such economically profitable projects. For example providing support for mono-cities, which might be discussed at a meeting of VEB’s Supervisory Board next week, this is a very grave problem for the Russian economy.

Vladimir DMITRIEV: It’s really a very grave problem. But I think a lot has been done recently to improve the the situation. You know that Vnesheconombank Deputy Chairman Irina Makieva isin charge of the interdepartment group. We are closely cooperating with the Economic Development Ministry. As part of our President’s instructions, a decision was made to establish a fund to support mono-cities. At a meeting of VEB’s Supervisory Board we’ll agree upon a candidature of this fund’s head. The fund will be substantially capitalized. And these funds will be used not only to finance infrastructure but also pre-project work and training courses designed to train regional authorities and professional investors to be able to enter the market with good high-quality projects.

Alexei BOBROVSKY: You provide support for new good projects, for example new projects of the Sukhoi Civil Aircraft Corporation. VEB purchased the Corporation’s shares worth 25 billion rubles. This is in general a strategic investment.

Vladimir DMITRIEV: There is no doubt about it. One of VEB’s top-priority lines of activity is to support high-technology production facilities. But in case of “Sukhoi”, it’s not only support for production facilities but also support for exports. We can see the geography of these aircraft’s supplies expanding – now we are supplying them to Mexico. Quite recently we have shown a picture from Venicewhere the planes are assembled for foreign customers at an assembly plant. This is not just an assembly of aircraftthis is cooperation with foreign producers – in this case with our Italian partners.

A transaction we have conducted recently with the United Aircraft Corporation - we purchased a block of shares, by the way, through using profit we received from selling EADS stake- is a part of our work on supporting our domestic aviation industry and promoting its products to foreign markets by using a comprehensive exports support system which includes Vnesheconombank and EXIAR (the Export Insurance Agency of Russia) and of course our foreign partners.

Alexei BOBROVSKY: It is quite clear that it’s difficult now to deal with Western partners, and what sort of strategy do you pursue in your relations with Eastern partners? Heads of major commercial banks have different opinions on this issue. As a whole, there are two opinions on this issue. The first one is that they want to lend money only to fund specific projects that are beneficial for the East. The second opinion is that we should just be able to work with them in a proper way and in this case, we are sure to find an adequate approach.How do you feel about it?

Vladimir DMITRIEV: It is obvious that we are not devising any new strategy; we are following the strategy that we have been implementing within several decades.

Alexei BOBROVSKY: That is to say, you had it in the past?

Vladimir DMITRIEV: Yes, we did - with respect to South-East Asia and China in particular. We have good relations with such partners as the China State Development Bank, one of the largest financing institution, the China Eximbank, China’sInsurance Agency SINOSURE. Above .all, I’d like to single out our relations with the China State Development Bank. I’d also mention our bilateral relations, our leading role in SCO Interbank Consortium as well as our close cooperation within BRICKS.

And I’d like to stress that our cooperation with the China State Development Bank is based not only on trust but also on the projects we are jointly implementing both in our country and also in third countries. Here I mean Kazakhstan where we are working together with the China State Development Bank to upgrade and expand the Ekibastuz production facilities. In the course of decades of our cooperation with the China State Development Bank we have raised billions of dollars on a tied and untied basis. And quite recently we have signed a new agreement with the China Eximbank on funding the Elginsk Coking and Power Generating Coals Deposit.

Our Bank and NOVATEK work with our Chinese partners - the China State Development Bank and the China Investment Corporation. Our work is designed to engage our Chinese partners in the Yamal LNG project. The China State Development Bank has extended credit facilities worth more than 500 million dollars to build a multifunctional office complex. The complex is to be built by Chinese companieson the territory of the former Slava watch plant next to Belarussian railway station. We received this property through rehabilitating GLOBEXBANK.So, we maintain multilateral cooperation and it is based not only tied credits but also on pure credit facilities. And we highly appreciate this cooperation without changing our strategy, without devising any new firefighting methods, measures and schemes. This is a long-time cooperation, it is stable is advancing rapidly.

Alexei BOBROVSKY: I wish you every success in this task.