VZCZCXYZ0031
RR RUEHWEB

DE RUEHMO #3002/01 3541501
ZNR UUUUU ZZH
R 201501Z DEC 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 5972
INFO RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

UNCLAS MOSCOW 013002 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/RUS 
TREASURY FOR BAKER/GAERTNER 
NSC FOR MCKIBBEN 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV RS
SUBJECT: RUSSIAN DEVELOPMENT "BANK" TAKES SHAPE 
 
 
Summary 
------- 
 
¶1.  (SBU) At a meeting of cabinet ministers on December 14, 
Economic Development and Trade Minister German Gref delivered 
a presentation on the prospective scope and functions of a 
new Russian Development Bank (RDB).  Gref's proposal would 
consolidate the Foreign Economic Activity Bank of the USSR 
(Vneshekonombank, VEB), the existing Russian Development 
Bank, and the Russian Export-Import Bank into a unified 
government development-financing structure.  The new 
institution would have charter capital totaling USD 70 
billion and would provide long-term financing for 
infrastructure projects and high-tech, export-oriented 
industries.  The ministers approved Gref's concept and 
Finance Minister Aleksey Kudrin's suggestion that the Prime 
Minister serve as the head of the RDB's Oversight Council. 
Prime Minister Mikhail Fradkov directed the ministers to 
develop a draft bill on the bank before the end of the year. 
End Summary. 
 
Russian Development Bank: Long-Term Focus 
----------------------------------------- 
 
¶2.  (SBU) Addressing a cabinet ministers' meeting on December 
14, Economic Development and Trade Minister German Gref 
outlined the prospective objectives and functions of the 
proposed Russian Development Bank (RDB).  He explained that 
the RDB would emerge from the consolidation of the Foreign 
Economic Activity Bank of the USSR (Vneshekonombank, VEB), 
the existing Russian Development Bank, and the Russian 
Export-Import Bank.  Gref emphasized that the government 
should foster transparency and self-sufficiency in RDB 
operations.  The consolidated structure would start 
operations from a capital base of USD 70 billion with the 
goals of supporting economic development, establishing new 
market sectors, and eliminating infrastructure imbalances 
among Russia's regions.  The RDB's main lines of business 
would be infrastructure and social projects, development and 
export of high-tech products, advanced technology imports, 
research and development support, and small business 
financing. 
 
¶3.  (SBU) Gref observed that the RBD, which President Putin 
first advocated in January, would complement existing 
government-supported institutions such as the Agency for Home 
Mortgage Lending, the Federal Agency for Management of 
Special Economic Zones, and the Investment Fund.  He also 
told cabinet members that the proposed move was in keeping 
with other countries' experience in establishing government 
finance institutions.  He expressed hope that the RDB would 
reproduce the successes of Ex-Im Bank in the U.S., the 
Japanese Development Bank, and Brazil's Socio-Economic 
Development Bank.  Gref argued that the RDB, as a government 
development institution, should focus on long-term project 
finance.  He suggested that partnership with the private 
sector would not only reduce some of the government's burden 
in supporting priority sectors, but also raise the 
profitability of longer-term endeavors. 
 
Not a Traditional Bank 
---------------------- 
 
¶4.  (SBU) Under Gref's plan, the RDB would not serve as a 
bank in the traditional sense of the word since it would not 
operate under a license from the Central Bank.  The RDB would 
neither make loans to individuals nor trade in securities, 
and would require special legislation to be organized as a 
government corporation.  Gref suggested that the 
legislation's general guidelines for the RDB should be to 
diversify the economy, improve infrastructure, and create 
conditions for long-term economic development.  The 
government would review the RDB's performance annually and 
adjust priority areas as necessary.  The government would 
provide general oversight, and the RDB would be subject to 
independent audits. 
 
RDB Concept Ultimately Approved 
------------------------------- 
 
¶5.  (SBU) There was apparently some debate.  Deputy Prime 
Minister Medvedev recommended calling the institution the 
"Russian Development Fund" or "Russian Development 
Corporation" since it would not technically operate as a 
bank.  Justice Minister Ustinov offered general objections to 
Gref's plan, noting that many laws would need to be passed 
for the RDB to function as outlined.  In an apparent effort 
to forge consensus among the ministers, Finance Minister 
Kudrin urged that the government appoint the RDB's leadership 
and suggested the Prime Minister serve as the head of the 
Oversight Council.  The ministers unanimously approved the 
RDB concept, and Prime Minister Fradkov directed the 
ministers to develop draft legislation that could be 
submitted to the Duma before the end of the year. 
 
Comment 
------- 
 
¶6.  (SBU) The idea of a Russian Development Bank had been 
kicking around for years prior to Putin's January nudge. 
Gref's presentation fell short of the mark that Putin had set 
earlier this year, namely that the government's draft bill on 
the Russian Development Bank be presented to the Duma by 
December 15, but it advanced the issue nevertheless. 
Disagreements between Gref and Kudrin on the prospective 
bank's functions slowed the process this year, but now these 
appear to be behind them.  The establishment of this bank 
would be a concrete measure in the emerging unified policy 
that Gref has often articulated to promote genuine 
diversification of the Russian economy, including through 
exports.  The proposed legislation creating the RDB, however, 
is likely to be very general in nature, given the two-week 
deadline and Prime Minister's reported frustration at 
"waiting months for us to give birth to this bank."  End 
Comment. 
RUSSELL