Moscow‘s plans to recapitalize its banks using sovereign bonds, called OFZ federal bonds, is coming under scrutiny as Russian authorities look to make after-the-fact adjustments to its eligibility criteria that favor a specific set of sanctioned and state-owned enterprises.
Changes are reportedly being discussed in Moscow that would include in the recapitalization plans specific banks hit by sanctions that do note meet the formal capital requirements initially put in place. These proposals would essentially give preference to undeserving sanctioned, state-controlled banks. The present list of sanctioned banks listed for state recapitalization support are: VTB; Bank Moskvy; Gazprombank; Russian Agricultural Bank; and Bank Rossiya.
The sovereign bonds raised to support the state‘s recapitalization plans were supposed to have a mandate of providing broad support to the Russian economy and were driven by a sentiment of national crisis. Accordingly, the redirecting of these funds to support banks that are undeserving or that do not meet this criteria, risks triggering accusations that Kremlin insiders are benefitting unfairly.
This trend has the potential to pit the general public against the oligarchs as well as Moscow leadership and demonstrates the difficult position that President Putin finds himself in, as he seeks to placate these business leaders while maintaining the support of the public ‘‘‘ all while seeking to manage a severe economic and financial downturn.
Moscow‘s crisis management plans should be watched closely for the development of this specific dynamic. In other words, the issue of ‘‘‘who is benefitting‘ from the national bailout efforts and the raising of sovereign debt has the potential to trigger resentment and unrest among the Russian population. It is one thing to be asked to sacrifice for the good of the country, but it is quite another for the public to observe the country‘s corrupt business leaders escaping from this responsibility and being bailed out by the raising of funds that the general public is essentially financing.