Putin’s Once-Mighty Bank for Pet Projects Now on Chopping Block

[uhnope]

Source: Bloomberg News

The bank that financed Vladimir Putin’s grandest ambitions is running out of cash. Vnesheconombank, which underwrote mega-projects like the Sochi Olympics and secret aid to allies in Ukraine, is dumping assets at fire-sale prices and relying on emergency government assistance to avoid default. It has virtually stopped new lending and cut off financing to most existing projects, according to two people close to the bank.

VEB’s travails are the latest reversal for the Putin system, hit by the plunge in oil prices and U.S. and European Union sanctions. A hybrid of tight state control and reliance on cheap market funding, VEB was the hallmark of the boom years. Now, with the price tag for its bailout rising above initial estimates of 1.3 trillion rubles ($20 billion), top officials are considering shrinking the bank to a shadow of its former self, according to four people involved in the discussions. The Russian president recognizes there’s no alternative to deep cuts, one of them said. Given the sensitivity of the issue, all spoke on condition they not be identified.

“VEB faces a future over the medium term of dealing with the problems created in the past,” said Vladimir Tikhomirov, chief economist at BCS Financial Group, a Moscow brokerage. “That means only one thing, it will shrivel up.” VEB’s problems mirror those of Russia’s economy as a whole. Short of cash and isolated internationally, the Kremlin must increasingly rely on its own limited resources to revive growth.
...
Originally set up under Soviet founder Vladimir Lenin, Putin turned VEB into a pillar of his Kremlin-driven economy at the height of the oil boom starting in 2007. He pumped tens of billions of dollars into it and took personal control over key lending decisions. Fueled by government support and easy credit from U.S. and European markets, VEB’s assets grew more than seven-fold to more than 4 trillion rubles as Putin channeled the funds into high-profile projects and bailouts too risky for other banks.
That came to an abrupt halt when VEB was hit with international sanctions in 2014 over the Ukraine crisis, cutting off its access to western markets. Recession exposed many of its investments -- which included failing banks, construction projects, ski resorts and rail cars -- as money-losers. Putin put over $6 billion into VEB from one of the country’s sovereign-wealth funds, but that was just a stopgap.

Read more: http://www.bloomberg.com/news/articles/2016-06-15/putin-s-once-mighty-bank-for-pet-projects-now-on-chopping-block

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Putin's cronies were already stealing the economy blind, but he further sabotaged Russia's finances when he occupied Ukraine.

[seabeckind]

1. Good thing we have a better bank.

The F35 is moving along nicely.

Some bumps in the road but it's proving to be very profitable. The fixes return more than expected.

[snooper2]

2. What you wrote, is that one continuous thought or three separate?

[seabeckind]

4. Maybe if you sound out the words.

One concept dealing with the specific spending for one toy.

We are borrowing one heluva lot to keep the war machine gassed up.

[newthinking]

3. "Putin's Bank", "Putin's system", gotta love those propaganda narratives

I would love to see just a few articles in the MSM that manage to do reporting without including the mandatory Narrative that Russia is Putin and Putin is a demigod/demidevil.

[lanlady]

5. Well, Putin and his cronies got their billions out of it

And that's all that matters to them, Russian economy be damned.