Page 50 - bneMag Oct23

50 I Eastern Europe bne October 2023
with Moscow focusing on strengthening trade ties with Tehran. Official reports claim a 20% boost in bilateral trade in 2022, reaching $5bn, although IMF data suggests a total of $2.4bn. This trade includes undisclosed oil swap deals and military trade. Moscow has become
the largest foreign investor in Iran, investing $2.76bn in the latest fiscal year. The trade mainly consists of foodstuffs exempt from US sanctions, but with new Western sanctions on Russia, the trade landscape may change.
Both nations aspire to expand annual bilateral trade to $40bn, a lofty goal considering their current trade volume lags far behind Russia's trade with other major partners like China, Turkey, and the EU.
Sanctions have severely limited their access to global financial and banking platforms, hindering trade and investment efforts. To address this, Russia and Iran have been cooperating on strengthening alternative banking avenues. The two countries are also united by their desire to dump the
dollar in international trade. Russia initiated de-dollarisation efforts following Western sanctions after the Crimea annexation in 2014, creating its own financial messaging system known as the SPFS. Progress has been made in bypassing the dollar in transactions with China, Venezuela and Iran. Iran, too, actively pursues de-dollarisation as a response to what it views as the weaponisation of the dollar. The countries have connected their banks directly and introduced
a rial-ruble exchange to de-dollarize trade. Russian banks are also issuing rial-denominated payments to Iranian banks, and credit card services are set to operate within Iran.
Iran's strategic geographic location has made it an attractive destination for investment in transit routes connecting Russia to Asia. These routes, including the Caspian Sea and the International North-South Transport Corridor (INSTC), offer road, rail and sea connections
from northern Russia to India. However, the INSTC has faced challenges due to
insufficient investment and sanctions against Iran. The Eurasian Development Bank (EDB) estimates over $26bn is needed to complete the INSTC, raising questions about which countries are willing and able to finance it.
Russia and Iran, both oil producers,
are traditionally competing energy exporters. Now they are showing a willingness to co-operate. Energy
swap deals are underway, and Russia plans to utilise Iran as a storage hub
to reduce oil delivery costs to Asian markets. Gazprom has also pledged
a $40bn investment in Iran's energy sector, including the development
of Iranian oil and gas fields and gas pipelines. Iran's energy infrastructure, constrained by Western sanctions,
can benefit from Russia's expertise in secondary gas production technology. However, Moscow cannot provide the funds Iran needs to modernise its energy system. Iran’s strategic petroleum sector alone is estimated to require $250bn in investment, an amount that is unlikely to come from Russia.
Kolomoisky charged with embezzling
$250mn from PrivatBank in landmark case
Ben Aris in Berlin
Former PrivatBank owner and oligarch Ihor Kolomoisky along with five associates has been charged with embezzling UAH9.2bn ($250mn) from Ukraine’s biggest commercial bank, PrivatBank, kicking off what will be Ukraine’s biggest ever corruption case.
The charges were brought by the National Anti-Corruption Bureau of Ukraine (NABU) on September 7 and allege that Kolomoisky established a scheme in early 2015 to transfer funds from PrivatBank to his offshore companies and increase his own share in the bank's capital.
In the wake of the bank’s subsequent collapse in 2016, National Bank of
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Ukraine (NBU) hired corporate sleuths Kroll to conduct a forensic audit, which reported “large-scale corruption” and that much of the money was siphoned out via shell companies in the UK and Cyprus. At least half a billion dollars of that money ended up in Cleveland in the US, where Kolomoisky is also being investigated for money laundering.
Despite his obvious culpability, no criminal charges were brought against Kolomoisky, who continued to operate in Ukraine with seeming impunity.
However, the management of the now state-owned PrivatBank has launched a series of civil cases against Kolomoisky in London, Cyprus and elsewhere, in an
effort to recover what the management call the “fraud loans”. The cases are wending their way through the courts, but a London judge has frozen $2bn worth of Kolomoisky’s assets while the UK case proceeds.
Founded by Kolomoisky, PrivatBank was the biggest and most successful bank in the country. However, the bank collapsed and was nationalised after
a bne IntelliNews cover story “Privat Investigations” published in November 2016 showed that its loan book was riddled with fake loans. A scandal and an NBU investigation later, the bank was nationalised in December after the regulator determined that over 90%
of the bank’s loans were fake and there