Regulator & Owner

The Central Bank is now both regulator and owner of Otkritie, Promsvyazbank, and BIN, Gazeta writes.

In addition, the Bank of Russia [that is, the CBR, -ed] became the owner of the largest Russian insurance company – Rosgosstrakh ([which was] part of Otkritie).

In 2017, for the first time in Russia’s post-Soviet history (in the USSR, of course, all the banks were state-owned and, in fact, simply redistributed State money), a paradoxical situation arose: the Bank of Russia, whose functions include regulating the banking market, was also its largest direct participant.

This is, Gazeta continues,

…as if the referee of a football match was simultaneously the head coach and captain of one of the competing teams. And the strongest. If you consider that the Central Bank is also the main shareholder of Sberbank, soon it will be necessary to raise the question of the meaning of the existence of commercial banks in the country as such.

If you combine the total assets of only three flagship banks that were reorganized and [are now] owned by the Central Bank – Otkritie, BIN, and Promsvyazbank (all these banks bailed out other lending institutions) – at the time of the introduction of the interim administration, they would have amounted to approximately 4.8 trillion rubles.

This would make the “Central Bank Group” the fourth-largest bank by assets, Gazeta writes. The first three are: Sberbank (state-owned), VTB (state-owned), and Gazprombank (state-owned).

The CBR has promised to sell these banks “to private investors” as soon as possible. But it seems “unlikely that they will find buyers in the foreseeable future” if current trends continue.

“This raises serious questions about the Bank of Russia itself.” What exactly is it doing? Gazeta asks. What is its role, if it’s not capable of regulating the banking sector?

The situation of the banks seems very precarious.

The Central Bank itself understands that the massive withdrawal of licenses has not yet made the Russian banking system fundamentally more reliable and honest. It is no coincidence that they have joined with the Ministry of Finance to prepare a bill that changes the amount of penalties for banks that violate the law, Kommersant writes.

The CBR has decided to tie the amount of fines for banks that do not comply with the law and do not comply with the regulator’s instructions, to the value of their own capital. The upper limit of the fine is not established.

What will happen in the coming year?

2018 will be decisive for the future of the Russian banking sector. Will it remain diverse with the presence of banks of different sizes, regional lending institutions, a notable private sector or will there gradually become one or more “super banks” under total state control? Many Russians still recall the early 90s, when suddenly even the seemingly unshakable and eternal structure of Sberbank collapsed, and millions of people lost their savings immediately.

The Bank of Russia has been able to cope with keeping the ruble exchange rate stable and relatively predictable, Gazeta concedes. But now it has to prove that it can effectively regulate the banking sector.

P.S. Nobody really seems to have addressed Alfa’s role in all of this, except for this piece I put up last year. But they are the largest private bank in the country, and to some degree responsible for the fact that the CBR took over three of their rivals. And as I discussed with Promsvyazbank, the evidence suggests that Alfa had a hand in bankrupting it.


Zala Group Update

My most popular blog posts this past year were not really Russia related. They were a story that I accidentally stumbled upon while researching corruption here in the country of Georgia.

Each quarter a report is put out on the banking sector in Georgia by KPMG [see here for the most recent one]. A company name caught my eye while scrolling through. And the whole story spun out from that.

I’m still getting asked about this story, so I thought a follow-up would be appreciated.

Shortly after I published my series on ESOL BV, Gilbert Armenta, William C Morro, and their partners in crime, a notice appeared regarding a company called MoneySwap.

It was “a notice convening an extraordinary general meeting (the “EGM”)”, whose purpose was:

“…to approve, inter alia:

i.    the subscription for new ordinary shares in the Company by Wraith Holding B.V. (“Wraith”), together with certain options to be granted to Wraith to subscribe for additional new ordinary shares;

Who was Wraith Holding B.V.?

You guessed it!

Gilbert Armenta and William C Morro.

In March, MoneySwap had entered into a loan agreement with Wraith, which “…was incorporated for the purpose of investing in MoneySwap.”

In a statement, MoneySwap’s interim CEO Craig Niven stated:

“I am pleased to be able to announce the involvement of Wraith, which we hope will result in Wraith becoming a controlling shareholder in Moneyswap. Wraith has a real vision as to how the company can be developed and the financial and management resources necessary to achieve this vision,”…

Morro is now a board member of Moneyswap. Of course, none of his fraudulent activities are mentioned, except to note that he is a director of the now infamous Zala Group Limited.

What is MoneySwap and what does it do?

MoneySwap is a Gibraltar incorporated payment solutions provider which allows both online and point of sale transactions to be settled using UnionPay cards with operations in Hong Kong and China.

MoneySwap was advised on Armenta and Morro’s takeover by Hamlins in London, who wrote:

Wraith is an investment company backed by Gilbert Amenta who has considerable experience in the payments sector.

*Cue the laugh track*

Meanwhile, Zala Group is still active and looking for employees.

Screen shot 2017-12-31 at 08.54.01

Zala’s contact page has been updated to show its connection to MoneySwap, using the latter’s addresses in London and Hong Kong.

Where is this going?

According to MoneySwap’s website:

MoneySwap provides a gateway to UnionPay’s MoneyExpress® services. This enables users abroad to remit funds directly to UnionPay cardholders in China. Each remittance is authenticated by UnionPay and the State Administration of Foreign Exchange of China (“SAFE”). The cardholder in China can withdraw cash at an ATM or make purchases where UnionPay cards are accepted. Currently, China is the second largest global recipient of remittances. MoneyExpress® is a secure, cost effective and convenient way to send funds to China. MoneyExpress® is a registered trademark of UnionPay.

Right now it can take days and exorbitant fees to transfer money from one country to another. There are multiple issues with SWIFT, and people are looking for options to move away from it. Getting a company on blockchain to transfer money easily and rapidly and cheaply would be an ideal alternative for many. China is one of the largest countries for remittances (it placed in the top 5 in 2016 with $61 billion), so you can imagine the fees a company like MoneySwap could rake in for their services.

As we know from my previous research into Armenta and Morro, it is also an ideal way to launder money.

My previous blog posts on Armenta, Morro, and their drug running, money laundering, Hawaiian separatist connections (in order):

Bank Fraud & Crypto Scams


More Details

Drug Smuggling


Roads & Fools

As promised, Russia’s Reserve Fund and National Welfare Fund have been merged.

“According to the new norms of the Budget Code, all additional oil and gas revenues of the budget will be channeled into the NWF.”

A brief background:

“The Reserve Fund and the NWF were established in 2008 after splitting the Stabilization Fund, to which the authorities channeled additional revenues from rising hydrocarbon prices. The Reserve Fund then became a source of financing the budget deficit in the event of a sharp fall in the revenues of the treasury [which is exactly what happened after the sharp drop in oil prices started in 2014, -ed.], and the NWF was created as part of the [long-term] pension provision mechanism… and financing long-term self-supporting [!? -ed] infrastructure projects.”

According to Minister of Finance Anton Siluanov, there “should be 3.7 trillion rubles [in the Fund] [or “slightly more than 4% of GDP”, -ed], and its liquid part, that is, free balances not invested in assets, 2.3 trillion rubles.”

About one-third of the Fund will be spent in 2018, according to Argumenti i Fakti.

“It [the NWF] will be replenished at the expense of the currency the Ministry [of Finance] buys on the exchange, using revenues from oil prices above $40 a barrel.”

Meanwhile, Interfax reported on 20 December that “…$6.25 billion of the NWF’s funds are sitting at VEB [Vnesheconombank] in a foreign currency account.”

At the time, Siluanov promised:

“…in order to close our currency position, we need rubles. VEB will carry out this operation gradually, with the agreement of the Central Bank, smoothly, without affecting the currency market….”

This had already been decided based on a decree signed by Russian Prime Minister Dmitry Medvedev back in November.

According to Kommersant:

“In June, the government supported the idea of pooling the resources… [of the two Funds], [that had been] proposed by the Ministry of Finance. The question was whether to direct funds to the NWF, not used to finance infrastructure projects, to cover the budget deficit, after funds of the Reserve Fund used for this purpose had been exhausted.”

Analyst Dmitry Golubovsky told Argumenti i Fakty:

“There is still enough money, because there are still funds in the NWF. Now the Ministry of Finance is engaged in transferring money from one account to another. This is due to the peculiarities of budget accounting. As for the Reserve Fund, its funds go to pay off the budget deficit, which was created as a result of the government spending more than it earns in the face of falling oil revenues. The size of this fund depends on the price of Brent crude oil in rubles. If it costs less than 3600-3700 rubles, then the government needs to take money from somewhere [else] and plug the hole. And since most of this year, oil was cheaper than this, we had to eat into the foreign exchange reserves.”

He continued:

“So what does it really mean that the reserve funds are exhausted? The government said that by the end of this year [2017], the money in the Reserve Fund will be exhausted, next year, if the price of oil falls, the NWF may also run out. If prices remain stable, at the current level, nothing will happen. This situation speaks only to one thing – that you need to start living within your means, and the cost of oil should not fall below 3800 [rubles]. If it is lower [than this] when the funds run out, the ruble rate will begin to be strictly correlated to the price of oil. Now we have a ruble cut off from the price of oil, you can see a very low dependence [emphasis added, -ed]. The rate is now determined purely by the dynamics of interest rates, taking into account the demand for OFZs [another scheme scam by the CBR & Ministry of Finance to prop up the ruble, -ed.]. But when there is no reserve money [left], then… everything will be determined by what happens in the commodity market.”

In the meantime, the Ministry of Economic Development is also desperate for these same funds.

In an article bearing the headline: “NWF funds will become more accessible”, Kommersant reported on 19 December that:

“The Ministry of Economic Development published a draft amendment to the government decree that will remove obstacles to the use of these funds – in particular, they can be used to pay… for concession agreements.”

The amendments “…take into account the specifics of the activities of Russian Railways and Avtodor [aka: Russian Highways, -ed], “including the need to ensure the stability of the conditions for their implementation.”

Kommersant had previously reported that Russian Railways and Avtodor had been having problems getting money for their projects due to the new rules “that run counter to the current legislation.”

The Ministry of Economic Development’s proposed amendments should be implemented by March, the newspaper concluded.

The “rainy day” that Russia was saving for turned out to be questionable infrastructure projects and foreign adventurism.

Roads and fools.

For more on this subject, you can read my earlier blog posts here and here and here

Systemic Banking Crisis

The Russian banking system, which in 2017 lost three of its five largest private banks, is in a state of unprecedented historical stress.

This is according to the experts at the Development Center at the Higher School of Economics.

On the surface:

…the financial system of Russia is operating under conditions of a liquidity surplus. This is due to manipulations with the Reserve Fund and the National Welfare Fund [by the Finance Ministry], which are a printing press for the budget…

As a result:

…banks have had a significant amount of excess ruble supply, but instead of lending to the Central Bank, they are – on the contrary – placing free money there.


According to the Ministry of Finance [statistics], over [the past] three years the volume of money printed to cover the federal budget deficit reached 5.5 trillion rubles, and by the end of 2017, the liquidity surplus of the banking system exceeded 2 trillion rubles.

But not everything is as it seems, as a more detailed reading bears out.

HSE’s Tatiana Misikhina explains:

“The bulk of liquidity is concentrated in a limited number of banks, while the rest of the credit institutions are experiencing a deficit…”

She continues:

Normally, with a liquidity surplus, banks give a “discount for wholesale”: if the money is in excess, then rates on corporate deposits are usually lower than for the deposits of individuals. This is what happened in 2010-2011, the difference reached 2 percentage points.

Now the situation is the opposite: corporate deposits remain more expensive than retail ones.

What does this mean?

“This indicates the presence of extremely serious imbalances within the system itself,” Misikhina says: there is a lot of money in the system, but it is unevenly distributed; in the market, there is a crisis of confidence – banks do not loan to one another, and some have a shortage of money that is “sustained and substantial in character.”

The experts at HSE calculated that… “the index of imbalances in the Russian banking system… has jumped 7 times in the past year, and is unprecedented in Russian banking history.”

Misikhina states:

“To calculate this index, the balances of interbank loans for all credit institutions are added up, the result is based on the amount of “transfers” within certain banking groups and correlated with the total amount of liabilities of the banking system. The system is considered internally balanced if the share of such transactions does not exceed the natural “technical” level. So the dynamics of this index in 2017 can be defined as over-scale,”

The problems in the banking system are not private or individual, but a systemic one, she concludes.

The HSE experts believe:

The “peaceful” way to resolve [these problems] could be an acceleration of healthy economic growth, primarily in the private sector… this would lead to corresponding growth in the client base of private banks, both large and medium, which would avoid a further wave of them failing.

But meanwhile there are no signs of any such thing happening: by Q3, GDP growth had slowed to 1.6%, and in the next it will not exceed 0.5%…

They note that:

…[what little growth there is] is mainly provided by the extraction of natural resources [oil, gas, mining, etc. -ed] and State structures in the form of “Power of Siberia” [Gazprom’s gas pipeline to China. -ed] and the Kerch Bridge.

As a result, the banks will continue to “fail”, and “the process of nationalization of the banking sector will apparently be irreversible,” Misikhina warns.

“Another consequence will be a very slow decline in interest rates in the economy, despite low inflation, as well as the absence of a significant effective demand for bank loans,” she adds.

DIA Reform

The Deposit Insurance Agency is preparing to submit a reform package to the State Duma on the liquidation of collapsed banks.

According to the DIA’s director, Yuri Isaev, the agency “…is currently engaged in the liquidation of 321 banks: the book value of their assets is 3.78 trillion rubles, and the estimated value is 0.44 trillion (! -ed) rubles.”

In addition, he says, it currently takes about three years to fully liquidate a bank.

In the past few years, “…the number of banks that have [been placed] under the management of the DIA has grown rapidly, the process is lengthy, and with time the assets… [lose value], and as a result, creditors get less.”

After revoking a banking license, the DIA takes over a few months later, “… and the sale of assets begins at least a couple of years [after that].”

Therefore, Isaev says that the DIA is putting forth a proposal “…to amend the law in order to improve the [agency’s] efficiency….”

“Immediately after the license is revoked, it [the DIA] will assess the quality of the assets, allocate and prepare them for sale.”

He insists:

“…this will shorten the term of liquidation of the banks to one and a half years and make the process more transparent.”

“The idea is to abandon the endless judicial procedures, which, for the most part, do not bring about the expected result, and [instead] focus on a quick, public, and effective sale…” before the assets depreciate.

In addition, he added, assets that were stolen from banks due to the criminal actions of the management or owners, will not be put up for sale…


…information about them… will form the basis of the application to law enforcement bodies [for prosecution].

The DIA does not plan to sell good assets for “quick cash” either, Isaev says.

Isaev hopes that the proposed reform will help not only increase revenue… but also reduce the costs of asset maintenance.

He claims that the CBR and the government support the DIA’s proposed reforms. Their amendments “…will be ready in January, so that the Duma can consider them in the Spring session.”

Pension Reform

The Russian government is discussing the possibility of transforming the Pension Fund of Russia into a public-law company.

…initially, [there is a proposal] to create a government body of the [Pension Fund] on a three party basis – with the participation of the State, representatives of the trade unions, and employers.

According to experts, the new legal status would allow the PFR to become more independent from the budget, would give it an opportunity to increase its reserves, and… [invest in] companies for additional profit.

One of RBC’s sources said:

“About a year ago, it was decided to study the possibility of regulating the status of the PFR, based on the norms of the federal law on public-law companies [see link for the text of the federal law in Russian]; the final version [of the bill] is still not available. Discussions continue between the Ministry of Labor, the Ministry of Finance, the Ministry of Economic Development, the trade unions, and employers’ organizations.”

The Chairman of the Federation of Independent Trade Unions of Russia, Mikhail Shmakov told RBC:

“It is impossible to say unequivocally whether this is bad or good, there are pros and cons, but in any case, the first place for management should be three-sided, and then choose the form – public-law company or a joint stock company, this, in fact, is now the conversation [that is taking place]. There are supporters of one option, there are supporters of the second option. A decision has not been made.”

Shmakov stressed that the parties involved in the discussion cannot agree and build a structure that would satisfy everyone and be efficient.

According to the chairman of the PFR Anton Drozdov, the draft law on a three-party management [structure] was prepared by the Pension Fund, but it never went beyond inter-agency coordination. In particular, there was an idea to form a fund management body over the executive body in the form of a system based on three parties: representatives of workers, employers, and the State…

Drozdov told RBC that:

“We prepared this bill several years ago, but then there were different proposals… that the fund should have greater independence, and greater autonomy from the budget in terms of insurance premiums.”

And, he continues, this brought up another issue, “because there were questions about the ownership of these contributions…”

“We have not yet managed to agree… on all the nuances of these divisions, so the discussion will continue next year,” Drozdov said.

The delay might be due to the upcoming presidential “election” that is scheduled to take place in March. Although it seems unlikely that any decision on the government’s part might change the outcome of the election, they may figure it is better to be safe than sorry.

Granting the PFR the status of a public-law company would allow it to start forming and accumulating reserves, believes Alexander Safonov, the vice-rector of the Academy of Labor and Social Relations.

“The pension fund will acquire better opportunities to act independently of the State. The State cannot be extracted from this process anyway, but in this case the Fund would become more independent, has the right to allocate its reserves, [and] increase them. All over the world, one of the ways to overcome the demographic wave of economic crisis is the formation of reserves and… [investing them]… including in foreign [corporations], to obtain additional profit,” said Safonov.


Yuri Gorlin, the deputy director of the Institute for Social Analysis and Forecasting of the Russian Academy of Sciences, says that the Pension Fund does not accumulate reserves. “There are no reserves at the Pension Fund, there are still some remnants. The PFR pays out everything it collects.”

The Finance Ministry and Economic Development Ministry “oppose greater independence for the PFR.”

“The granting of [a new] legal status to the PFR means that it will not be possible to transfer money, spend the Fund’s money on non-target tasks, it will not be possible to withdraw reserves, which the Finance Ministry does not like,” Safonov notes.

According to Safonov, the Finance Ministry considers the Pension Fund to be part of its budget, and has been using the money from it to “plug any holes” in the budget.

Clean Out

The clean-up clean out of the banking sector could last another two years, Central Bank Chief Elvira Nabiullina said in an interview with the TV channel “Rossiya 24”.

“In the summer, we estimated that [it would take] probably two or three more years. …we will still be forced [! -ed] to revoke licenses a little more often than we should.”

The CBR revoked the licenses of 50 banks this year. In 2013, they closed 32 banks. In 2014, the CBR closed 86. In 2015, they shut down 94, and in 2016 they revoked the licenses of 97 banks [see my 2016 list here].

She [Nabiullina] pointed out that after this period [of 2-3 years], the revoking of banking licenses and bailouts will take place only in isolated and exceptional cases.

The Central Bank began implementing their bailout scheme scam this year, targeting the bigger banks: Otkritie, BIN and Promsvyazbank, whose stories I’ve covered here on the blog. Nabiullina also mentioned the newly created Banking Sector Consolidation Fund which is overseeing the bailouts:

“Obviously such large banks had to be bailed out so that depositors and creditors would not lose money.”

TASS quoted Nabiullina as saying:

“We are discussing whether to unite them [Otkritie, BIN, & PSB] or not – these issues have not been resolved yet. For us, the task is to create an effective business model for these banks.”

For more on this discussion, see my blog post here.

Dmitry Ananyev Flees

Promsvyazbank‘s Dmitry Ananyev has left Russia.

“Ananyev told Vedomosti via Skype that he left Russia last week. “I had long planned to leave for the New Year, left on Dec 22. And under the pressure of the last four months, unlimited work, and a nerve-racking time, heart problems have appeared,” he said.”

He continued:

“But I do not agree how it was presented in media, like I ran away. I did not run away.” Ananyev did not disclose his whereabouts.

He also apparently gave no indication that he intended to return. It also seems unlikely that Ananyev will return (or not willingly, anyway). PSB is currently being investigated by the Central Bank for fraud.

The CBR’s Pozdyshev claims:

“…the day before the announcement of the bailout, the management of PSB through a non-state pension funds management company sold shares of the credit institution, transferring the received funds to the account of the offshore company Promsvyaz Capital [BV].”

“The transaction was conducted via the [Moscow] stock exchange to conceal the manipulation.” Pozdyshev said. The sale amounted to 16.5 million rubles. “It was evident that a large stake in the bank was sold… 10%.”

“Exactly one week later,” he continued, “the NPF demanded that the… [CBR] return the deposits they had placed on 14 December.”

In addition, the CBR is investigating PSB for financing their subordinated debt via the REPO auctions.

“Transactions of purchase and sale of securities were signed on December 14, by a foreign citizen who was employed by the bank two days earlier, he received a power of attorney from the bank’s president on December 12 to conduct these transactions, says Pozdyshev. “The data of the same employee of the bank appear in the acts of acceptance and transfer of the “missing” credit files on December 14…”

According to Vedomosti that “foreign citizen” is co-owner of the bank Dmitry Ananyev. Recall that Ananyev left the Duma in 2013 due to his dual citizenship and the fact that he had assets “abroad” (is Cyprus really abroad anymore?)

All joking aside, the Ananyevs have assets in multiple jurisdictions including BVI, UK, Ireland, the Netherlands, etc.

Promsvyaz Capital BV is a non-operating holding company based in the Netherlands, which focuses on the Russian banking sector and owns a 50.03% stake in the authorized capital of PSB.

49.9975% of Promsvyaz Capital BV is held by Urgula Platinum Ltd. in the UK. Another 49.9975% is held by Antracite Investment Ltd., also registered in the UK. The two companies are controlled by Dmitry and Alexei Ananyev, respectively.

According to filings for both companies:

“On 10 November 2015, Promsvyaz Capital BV issued one additional ordinary share at par value of EUR1 which was acquired by a new shareholder. The company’s participation in the shares of Promsvyaz Capital BV changed to 49.9975%.”

The identity of the mystery investor is not revealed.

Interestingly, the holding company and its UK owners all changed agents about a year ago, according to corporate filings. Right about the time they would have known they were going under. They had been using InterTrust Group, but they are currently using the services of Centralis Netherlands BV. A comparison of the two websites is revealing. Why would a bank the size of PSB move from a major offshore services firm to one that (quite frankly) looks like amateurs? One possible reason: an investment company associated with the largest private bank in Russia is also using their services. Were the Ananyevs looking for protection? Or was it something more sinister?


I have one more Promsvyazbank story to tell, but this story came up yesterday and I want to clarify a few things about it.

The Financial Times writes:

According to documents seen by the Financial Times, lawyers for Lehram wrote to Russia’s justice minister last week demanding damages of $500m, and threatening to begin international arbitration proceedings if an agreement is not reached within three months.

There are multiple problems with this article, not least of which is that Lehram Capital Investments Ltd. is “British” in name only. Not one person on the paperwork filed with Companies House is British. Second, the company has been “dormant” since its inception in November 2011. According to its most recent filing, there is only £900 “cash at bank and in hand”. What exactly is it doing then? Certainly not buying up “distressed assets”, as it claims.


“Daniel Rodriguez”, whom the FT says is Lehram’s shareholder is never named on Lehram’s paperwork, which raises even more questions about Lehram and who it really represents.

The sole shareholder is named as BVI company Hasbrone Overseas Limited. Hasbrone is using the address of the self-proclaimed “leading international offshore law firm” Harneys.

Another dead end.

A quick background for those unfamiliar with the real story as I was:

In October 2013, Russian mining conglomerate Evraz agreed to sell its Gramoteinskaya mine to the unknown Lehram Capital Investments Ltd. for 10,000 rubles. The mine had been shut down since a methane leak that had hospitalized seven miners in late 2012. But even so, the company was valued at $13 million just three months before it was sold.

Evraz said that the disposal is part of its ongoing strategy to get rid of badly performing assets, and the company is putting its focus on developing its coking coal mines for steel-making.

The Western press is vague about what happened and when, and has a habit of contradicting itself (see for example this Guardian coverage from 2015), so I had to go to the Russian media for details.

According to Novaya Gazeta, Russian businessman Alexander Shchukin is tied up in the  ongoing political crisis taking place in Kemerovo, where Gramoteinskaya is located.

Interpol put in a request to Russia sometime in the autumn of 2015 for paperwork related to Shchukin’s offshores and illegal transfer of “several hundred million Euros” out of Russia via Cyprus. But nearly a year later, nothing had happened on the Russian side. This was despite the fact, Novaya points out, that the source of the request came “from the materials of the trial in the Royal Court of London, initiated by Shchukin’s relatives.”

The Shchukins were involved in another court case in London at the time, trying to get their money back from a man named Adrian John Lumley Burford who they claimed had defrauded them.

The High Court has heard how Burford, 51, wove an elaborate web of lies by claiming to have links to MI5, a senior role in management consultants McKinsey & Co and business relationships with the rich and powerful around the world.

In 2014, Burford was ordered to repay £12.5 million he had stolen from the Shchukin family.

Back to Russia and the Gramoteinskaya mine. Within two months of the transaction between Evraz and Lehram being reported in the media, the shares were transferred to an offshore entity belonging to Alexander Shchukin.

Allegedly, Shchukin used his influence with Kemerovo governor, Aman Tuleyev, to have Lehram’s representative in Russia arrested and imprisoned for some period of time (between 10 days and three weeks, depending on which version of the story you believe) in order to force Lehram to sign the shares over to Shchukin.

0.01% of the authorized capital of the Gramoteinskaya mine was linked to Shchukin. Later, the mine was sold to KuzGri LLC. Then, as early as April, 2015 the 100% of the mine was transferred again to Cyrith Holdings Ltd. This Cyprus-based company is also the owner of another Shchukin’s mine – ‘Polusukhinskaya’. Cyrith is reportedly owned by another Cyprian offshore – Lassiter Limited that is in turn owned by Forcena Investments Limited. And the latter is owned by the British Virgin Islands-based Yuvia Holdings. Who is behind of this offshore remains unclear…

This was not the first time Shchukin had pulled this stunt in an effort to take control over local mines in Kemerovo.

In April 2013, the local department of the SKR [often referred to as Russia’s equivalent of the FBI -ed.] opened a case against a local coal mine owner, Boris Yakubuk. He was released after two months, but “only after he signed all the documents on the sale of his assets, which eventually came under the management of a company controlled by Shchukin,” Novaya Gazeta writes.

Shchukin was arrested in Cyprus in November 2016, and placed under house arrest. His current status is unclear.

Novaya concludes:

“Moreover, even the presence of Shchukin under house arrest does not hinder his companions and relatives from withdrawing money from Russia, as one might assume. Thus, for the first quarter of 2017, Shchukin’s Polusokhinskaya Mine moved 1.1 billion rubles to his Cyprus offshore as a “dividend”; PTC-Coal, registered in Shchukin’s wife’s name, sent 3 billion rubles to Cyprus in the first three months of 2017. Another 2.5 billion rubles went to Cyprus from Shchukin-controlled JSC Aktiv-Capital.”


It was known as far back as March that Promsvyazbank was in a hole it could not dig itself out of. PSB had been shifting money around to try to hide the fact, but their 2016 accounts made it clear:

“The bank, owned by Alexei and Dmitry Ananyev, after losses of 16,4 billion rubles… showed an impossible profit of 2,1 billion rubles.”

This was done by raiding the bank’s reserves, the Moscow Post explained.

“Unlike previous years, PSB underbooked the non-serviced portion of the loan portfolio, which helped the bank claim a net profit in 2016. Market practice is that large banks generally cover loans overdue by 90 days,” says Moody’s analyst Lev Dorf. Moreover, the profit shown in [PSB’s] 2016 report is 2 billion rubles, for a bank with a balance of 1,2 trillion rubles, this is insignificant….”

In addition, it appears that the Ananyevs had no intention of helping themselves out of the hole they had dug. According to PSB’s own deputy chairman, “capitalization at the expense of the shareholders is not planned.”

The Moscow Post reminded its readers:

“Recall that in February of this year, Viktor Pichugov, one of the main shareholders and a former member of the Federation Council, withdrew from Vozrozhdenie, an affiliate of PSB.”

“There was a decrease in the volume of funds of retail customers… It became clear that Vozrozhdenie had problems when its “influential customers” ran: Valery Gergiev, Nikita Mikhalkov, and… the famous cardiac surgeon Leo Bokeria. In general, the reduction in the retail deposit portfolio of Vozrozhdenie amounted to 8,4 billion rubles.”


“Minority shareholders of Bank Vozrozhdenie were not interested in the proposal of the Ananyevs to buy shares in the bank in order to replenish the assets of the financial institution.”

The story of PSB is much the same as the other banks that have had to be bailed out by the Central Bank. The Central Bank relied on the bigger banks to rescue the smaller banks that were going under, and gave them money to do so.

“The DIA allocated money to the Ananyevs for the bailouts. What happened to these funds afterwards is difficult to trace. But, in July 2016, the Central Bank removed the DIA and private banks from the rehabilitation of distressed assets.”

The CBR realized that this method of bailouts was not doing what it had hoped.

“Our analysis of the progress of the bailouts shows that, as a rule, investors themselves do not invest in the capital of a bailed out bank, do not always develop its business, and sometimes use the balance of the bailed out bank for bad debts, placing a large share of the funds received for rehabilitation in their own projects,” said [CBR chief] Elvira Nabiullina.

In addition to moving money around to show a profit, the Moscow Post notes in its article that Promsvyazbank had “…filed a claim with the [Moscow] Arbitration Court… to recover debt totaling 5,99 billion rubles [from Svyaznoy]. …if Svyaznoy does not repay this amount, PSB will ask the court to reclaim the assets of the retailer that are mortgaged for this loan. True, the likelihood that the Ananyevs will have time to get the hotels and Svyaznoy in the short-term is not high.”

The Ananyevs were also going after Alexander Gusakov’s Heliopark Group for a $26 million debt. “…[he] may lose his 12 hotels.”

But again, taking these companies to court was not an answer to PSB’s immediate problem.

Will the Ananyevs flee abroad, the Moscow Post asked, noting that Dmitry Ananyev had given up his Federation Council seat in 2013 after the rules on holding assets abroad changed.

“Ananyev tried to transfer his assets to Russia, but with such a large amount it is not always possible to do it in three months,” said Vice-Speaker of the Federation Council Eugene Bushmin.

Not possible or not trying hard enough?

[Dmitry] Ananyev has a place to leave to, but whether depositors will get their money, if PSB becomes bankrupt, is disputable.”