How Russian companies bypass sanctions – media

In December last year, the Russian government announced that the wall of sanctions built by the United States, the EU, and several other countries was cracking, Novoe Vremia reports.

 After all, major international organizations based in Switzerland and Qatar purchased a stake in the state-owned company Rosneft – one of the companies that have long been put on sanctions lists. Although experts believe that the deal is fictitious, Russian businesses have actually learned the way to circumvent international restrictions. The Kremlin is actively helping them to this end.

Read alsoObama extends sanctions on Russia over aggression in Ukraine by one yearSince the introduction of sanctions, Russia’s little-known Otkritie Bank has sharply – fivefold – raised its assets. Eventually, it took up a 4% share in the Russian banking sector. The financial institution started growing after it had received loans worth $21 billion from the Russian Central Bank. The Ministry of Finance of the Russian Federation has also helped, having made a grant contribution of $1 billion in the bank’s capital in 2015. State-owned VTB Bank is also reported to have issued loans to Otkritie Bank and then became the owner of 10% of its shares. Moreover, the sources say that VTB also has an additional 60% stake pledged as security for loans. Russian government agencies are generous for a reason: with the help of the private Otkritie Bank, which is not subject to international restrictions, the Kremlin is trying to circumvent sanctions imposed on Russia by the U.S., EU and some other countries following the annexation of Crimea and the invasion of Donbas.

Russia's Vedomosti business newspaper suggests that it is Otkritie Bank which can stand behind the purchase of Rosneft bonds worth more than $10 billion. The Bank also spent the Central Bank's money to buy Eurobonds issued by the Russian government. In addition, Otkritie Bank has attracted $500 million in the global market by issuing debt securities. According to the sources, it will continue to do so. The Bank has not only become a tool to attract foreign currency by Russian government agencies, but also allowed its shareholders to make some good cash.

Read alsoDeutsche Bank predicts easing of U.S. sanctions against Russia by spring of 2017In December last year, the Russian government proudly announced that the wall of the international sanctions had given a crack: 19.5% of the shares of Rosneft were acquired by foreign investors. Swiss commodity trader Glencore and Qatar Investment Fund bought a stake in the state-owned company for EUR 10.5 billion. However, Glencore later said that the deal had amounted to EUR 10.2 billion. According to analysts, this unexpected determination of investors, who chose to defy bans, was due to the fact that they did not, in fact, pay any money. On the eve of the deal sign-off, Rosneft attracted $9.4 billion in debt in the internal market, and, apparently, it repurchased its own shares through intermediaries – Glencore and QIF – in order to show the world “the interest of international investors in Russian assets.”

Read alsoRussian official rejects Trump offer to lift sanctions for nuclear arms dealRussian quasi-state companies invent their own sanctions workarounds.  Another sanctioned Rossiya Bank, controlled by Putin's entourage, gave its shares in the Sogaz insurance company to a subsidiary of the same company and thus took it from under the restrictions on attracting capital. VTB Bank did the same with the shares of Cyprus-based RCB Bank Ltd which it controls. VTB management and the above-mentioned Otkritie bank have formally become co-owners of this financial institution. In addition, the state bank has structured its foreign assets in a way that VTB Austria appeared to be out of the sanctions range, although it is the direct branch of the sanctioned financial institution.

Novatek energy company, owned by Putin's friend Gennady Timchenko, is trying to attract debt financing in the amount of EUR 1 billion in Japan, hoping that Japanese businesses, unlike in the U.S. or the EU, will not be afraid to violate the sanctions regime. Timchenko also tried to transfer his assets to Swedish citizen Sven Olson. However, the U.S. Treasury extended the sanctions against the Swede, having accused Russian oligarchs in an attempt to circumvent the restrictions imposed. Now they may as well face fines and possible tightening of the current regime. Another friend of Mr Putin, a billionaire Arkady Rotenberg, who came under the U.S. and EU sanctions in 2014, made his son, who is not subject to sanctions, an owner of his entire business empire in construction, chemical and banking sectors.

Read alsoTrump’s weird quid pro quo with PutinAccording to experts, Russia needs a constant money inflow, therefore the Kremlin never stops thinking up new schemes to circumvent sanctions.