MOSCOW—When the Russian government needed to build up infrastructure in the southern city of Sochi ahead of the 2014 Winter Olympic Games, it turned to Russia’s most important lender: Vnesheconombank, the country’s state-owned development bank. Russian President Vladimir Putin said private investors would be responsible for most of the Olympic costs, which ballooned to an estimated $50 billion. But VEB ended up picking up much of the...
Russia’s state-owned development bank and its biggest lender, Vnesheconombank [VEB], is reportedly in need of a bailout. In 2008, the bank became a dumping ground for bad assets and money-losing state projects. In 2013 the then head of the bank said it had spent $8bn investing in the commodity sector in eastern Ukraine, where activity has since come to a near stand-still. The government turned to VEB when costs for the 2014 Winter Olympic Games in Sochi ballooned leaving the bank with the equivalent of $2.9bn overdue loans on its books. The sanctions following the country’s annexation of Crimea have also taken their toll on VEB, which was very exposed to international capital markets, leaving it with about $20bn in foreign-currency debt and limited access to capital markets. Late last month the government said it would provide aid worth $2.2bn, around half the amount analysts estimate is the minimum amount of relief the bank will need this year.