Publication: Monitor Volume: 4 Issue: 204

Deputy Prime Minister Gennady Kulik said yesterday that the cabinet had received a number of offers from abroad to buy out insolvent banks. He viewed such offers, however, “very cautiously,” fearing that foreign financial institutions would buy into the banking sector in order to siphon depositors’ money out of the country. Kulik’s remarks would appear to represent a backtracking by the government, which last month promised that Western banks would be welcome–and even encouraged–to operate in Russia.

Some observers have warned that Gerashchenko’s bank restructuring plan simply makes the Central Bank Russia’s banking monopolist (“oligarch,” if you like). Such observers have also warned that the government’s choices on which banks it bails out will be based on political–as opposed to market–considerations. According to one scenario, some of Russia’s top banker-industrialists would even welcome a “soft” nationalization of their institutions, as long as they were allowed to keep a significant share of the package for themselves. The case of SBS-Agro–headed by Aleksandr Smolensky, one of Russia’s “oligarchs”–would appear to bear this out. Kulik said Tuesday that SBS-Agro was prepared to sell a controlling stake to the state; the same day, SBS-Agro said it would support the Agrarian Party, to which Kulik belongs, in next year’s parliamentary elections (Russian agencies, November 3).

One liberal publication described the bank restructuring program as following a “quasi-statist” model “oriented towards servicing a corporatist economy and a powerful state,” in which the Central Bank and various “authorized” commercial banks play key roles. The magazine suggested Gerashchenko’s plan envisioned a system resembling those in Japan, South Korean and China (Novoe Vremya, October 25).

In the meantime, some would argue that Kulik’s fears of foreigners siphoning money abroad were misplaced: “Kommersant daily” reported that Western creditors of Inkombank were preparing to investigate what happened to US$1.5 billion dollars which reportedly has disappeared from the bank’s accounts since August 17. The creditors are trying to gather enough evidence to trigger a criminal investigation. Last week, the Central Bank withdrew Inkombank’s banking license. Inkombank was one of the banks which received Central Bank credits after the August crash (Kommersant daily, November 3).