Russian President Vladimir Putin is trying to use the New Bank for Development (NBD), the bank of the BRICS, to help projects of Russian oligarchs, since Russia's access to financial markets remains extremely limited, according to experts.
The recent approval by NBD of a $300 million loan to Russian petrochemical giant Sibur drew analysts' attention to the risk of reputation for the institution.
Sibur is controlled by three nearby oligarchs of the Kremlin - Kirill Shamalov, Putin's ex-son-in-law, Gennady Timchenko and Leonid Mikhelson - who were hit by a list of US-imposed sanctions on Russian oligarchs.
Russia currently has minimal access to international funding, which harms investments, economic growth and living standards, not to mention modernization, says Anders Åslund, a member of the Atlantic Council of Washington, a professor at Georgetown University who prepares a book on crony capitalism in Russia to be released in May 2019
"It is only natural that they [the Kremlin] try to use the bank of the BRICs, but the main point is that very little is available beyond the reach of the US Treasury," says Åslund on sanctions.
Internationally, the July and 2014 financial sanctions imposed by the US and the European Union (EU) proved surprisingly effective. The sanctions applied by the US Treasury in April this year are also considered very severe.
Åslund notes that the Kremlin has taken several steps to defend itself from Western sanctions, mainly by restricting transparency in government decisions.
A few months ago, the Russian government stopped issuing contracts from the Armed Forces, which were strangely publicly available in a database. In October, the government allowed assets of sanctioned individuals to be kept secret.
In 2017, Russia promulgated the so-called Rotenberg Act, which promises full compensation to individuals who have assets seized because of foreign sanctions. The law is an indirect reference to Arkady Rotenberg, a billionaire who had assets confiscated outside of Russia, mainly in Italy. Åslund also points out that the Kremlin has transformed Promsvyazbank, a private bank that broke in late 2017 into a state-owned bank specializing in sanctions and defense companies.
"None of the four big Russian state banks dared to provide funding to Russia because they all have substantial activities in the US," says Åslund. "Russia has turned to two purely Chinese state-owned financial institutions, such as the Chinese Development Bank, to finance the Yamal project." It is a liquefied natural gas (LNG) project in Siberia. It is an investment of US $27 billion, one of the most ambitious in the world in the sector. Western sanctions against oligarchs did not put the Russian elites against Putin and his policy, notes Tatiana Kastouéva-Jean, director of the Russian Center for the French Institute of International Relations (IFRI). "Russia will not back down in its annexation of the Crimea," he says.
After approving the credit for Sibur, the NBD tends to be more questioned about the transparency of its operations with the five partner countries. Brazil, Russia, India, China and South Africa are submitting project proposals for NDB funding. It is up to the board of directors of the bank to approve or not.
But Professor Karin Costa Vazquez, from O.P. Jindal Global University, India, notes that "the parameters used to evaluate the proposals received are unclear. Nor are the criteria used to assess the contribution of these projects to the creation of sustainable infrastructure."
The professor says that Brazilian, Indian and Russian organizations have sent the bank requests for information on projects and contracts, but have not yet received an answer.
(original article in Portuguese)