MOSCOW (Reuters) - President Vladimir Putin removed the head of Russia’s ailing state development bank Vnesheconombank on Friday and appointed a successor from Sberbank (SBER.MM) who will be expected to oversee a bailout that could swell to as much as $16 billion.
The dismissal of Vladimir Dmitriev is the latest sign that loyalty to the Kremlin is not sufficient for senior state officials to keep their posts in times of economic crisis when cash is tight.
Dmitriev’s ouster, announced on the Kremlin website, had been widely expected. VEB has accumulated billions of dollars of toxic assets after lending to financially questionable projects over many years.
Sources close to VEB told Reuters last week the government could no longer tolerate Dmitriev’s failure at the bank, which he had led since 2004, and that a decision had been taken to appoint Sergei Gorkov from Sberbank in his place.
Finance Minister Anton Siluanov said there were no discussions about closing VEB and the government would give the bank 150 billion roubles ($1.98 billion) for recapitalisation as part of its anti-crisis plan.
“VEB worked, and will work, as an instrument of development,” TASS news agency quoted Siluanov as saying.
“The state, as a founder of this corporation, will do its utmost to resolve the temporary difficulties VEB has developed.”
Two sources familiar with the matter told Reuters this week that Putin had first offered the top job at VEB to German Gref, chief executive at Sberbank, Russia’s top bank, but that he had turned the position down.
“Gref preferred just to send one of his ‘troops’ to VEB for a rescue operation,” a senior government official said, adding that Gorkov’s team would now go through VEB’s assets and deal with its bad loans.
Sberbank declined to comment on whether Gref had been offered the post. VEB released a terse statement confirming that Gorkov had been named chairman.
The Russian economy is heading for its second year of recession due to weak oil prices and Western sanctions over the Ukraine crisis. When global oil prices were high, VEB lent huge sums to politically expedient initiatives such as infrastructure projects for the 2014 Sochi Winter Olympics, but its debts have piled up, giving the Kremlin a big financial headache.
That a team from Sberbank has been chosen to oversee the overhaul is an endorsement of Gref’s tenure at the bank, which was seen as an outdated relic of the Soviet era before he took over in 2007.
Gref worked with Putin in St Petersburg, Russia’s second biggest city, before Putin became president and he is one of the few people in the president’s circle who regularly criticises economic policy and calls for changes of course.
The senior official said Putin valued the fact that Sberbank had not sought state aid during the current crisis.
In a measure of VEB’s difficulties, at one point at the end of last year the government was discussing giving it treasury bonds worth over 1.5 trillion roubles ($20 billion) as part of a support package.
Although support for VEB is now likely to be smaller and spread over several years, it will still require a large injection of state cash.
Dmitriev’s dismissal follows the removal of Vladimir Yakunin, the head of the state railways company, and Evgeny Dod, the boss of state-owned RusHydro, Russia’s biggest hydropower producer, in the past year.
($1 = 75.6300 roubles)
Additional reporting by Oksana Kobzeva and Lidia Kelly; Writing by Alexander Winning and Jack Stubbs; Editing by Andrew Osborn and Mark Heinrich