Russia announced state aid for a major energy project on Wednesday under a drive to shore up strategic firms, as well as public faith in its banking system during an economic crisis deepened by Western sanctions.
The government said it had allocated 150 billion rubles (US$2.5 billion) to support the Yamal liquefied natural gas project in the Russian Arctic, taking the total bill for state aid promised to firms in the past few days to over US$5 billion.
On top of the help for Yamal — which is controlled by the Novatek firm, but also has Western and Chinese shareholders — Russia has announced support for the state railways and two banks: the country’s second-largest, VTB, and Gazprombank.
Russia is sliding into recession as the international price of oil, its main export earner, tumbles, while the rouble lost more than 40 percent against the US dollar last year.
At the same time, sanctions imposed by the EU and US over Moscow’s role in Ukraine have effectively locked Russian firms out of global capital markets.
On Tuesday, the government boosted the capital of VTB by 100 billion rubles and bought 40 billion rubles’ worth of preference shares in Gazprombank.
The aid is coming from the National Wealth Fund (NWF), one of two sovereign funds financed from oil taxes, which held about US$80 billion at the start of last month.
Gazprombank said the government had bought its preference shares using money the bank had returned to the NWF by repaying subordinated deposits it had received earlier.
“The conversion allows the bank to strengthen its capital structure and provides for sufficient scope to expand its operations,” Gazprombank said.
The shares are non-voting and therefore the deal would not affect the rights of current shareholders, it added.
VTB said it expected a further 150 billion rubles by the end of the first quarter to increase its capital and fund investment projects approved by the government.
Russian banks are reeling from the ruble’s plunge, which led to heavy deposit withdrawals as citizens rushed to convert their savings into hard currencies, while domestic firms have seen the cost of servicing their overseas debt leap.
Last week, the authorities significantly scaled up rescue funds for mid-sized lender Trust Bank, saying they would provide up to US$2.4 billion in loans to bail it out.
The banking sector is set to receive an additional capital boost of up to 1 trillion rubles from early this year after Russian President Vladimir Putin signed into law legislation allowing the government to give banks OFZ treasury bonds via a state corporation.
It is not clear which banks could benefit from that law, but VTB and Gazprombank are seen as contenders as they are considered systemically important. Top bank Sberbank would probably receive any support via a different route, most likely a subordinated loan from the central bank, since the regulator is its main shareholder.
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