. Last Updated: 07/27/2016

Uneximbank: Winner With the Inside Track

One bank that you will not see advertised on television or on the ubiquitous roadside billboards around Moscow is the United Export-Import Bank, better known as Uneximbank, one of the most powerful and influential institutions of its kind in Russia.


This is the bank that walked away from the controversial loans-for-shares scheme late last year with large stakes in several of Russia's most coveted companies, including Norilsk, the world's largest producer of nickel, oil major Sidanko, the North-West Steamship Line and the Novolipetsk metallurgical combine.


Uneximbank doubtless was helped in acquiring assets in these four companies -- which cost it $337 million and by some estimates could potentially be worth at least several times more, notably the Norilsk stake -- by the fact that it was one of two banks authorized by the State Property Committee to collect applications for participation in the tenders, as well as the bids.


For the initiated, Uneximbank's prominence at the auctions came as no surprise. Already among the largest thousand banks in the world and described by Euromoney magazine last year as Russia's best, Uneximbank is a rising star.


According to an assessment of the Russian banking system made last year by a major U.S. bank, Uneximbank is highly competent: Its policy, said the report, "is distinguished by extreme meticulousness; its supervisory personnel have experience in the successful development of business in various branches."


Undoubtedly the bank also owes its success in part to political connections -- it was born as an "insider" bank.


But for most industry outsiders, Uneximbank was a new name nevertheless when it cropped up during the loans-for-shares auctions. Judging by the dearth of information on it and its principals in the press, Uneximbank could rightly be called the Howard Hughes of Russian banking -- an enigmatic, publicity-shy entity which prefers working behind the scenes.


The bank's information department did not respond to a list of questions submitted by fax. In addition, most of the analysts interviewed for this article asked not to be named.


Uneximbank president Vladimir Potanin is not to be found in the Russian Who's Who or other sources, and the bank did not provide requested biographical information on its chief.


From whatever information is available, Potanin is believed to have been instrumental both in founding Uneximbank and in masterminding its subsequent success. In the words of Segodnya economics writer Alexander Bekker, Potanin emerged from the "innermost depths" of the Foreign Trade Ministry to form Uneximbank in 1993, using the capital of foreign trade associations and export-oriented enterprises as "yeast" for the new bank.


According to a second Western analyst, who also requested anonymity, Potanin is a relatively young banker who "creates his power base by convincing a lot of people that what he does is necessary for them."


This analyst said that Potanin's talent for salesmanship can be traced back to his days as a Komsomol, or Young Communist League, leader, a relatively common genesis in the younger generation of Russian bankers.


Potanin's persuasive powers were perhaps best displayed last March 30, when he reportedly convinced Prime Minister Viktor Chernomyrdin to agree to give a consortium of banks shares in key Russian enterprises in exchange for loans to the government. According to Russian press reports, Potanin had already convinced then-Deputy Prime Minister Anatoly Chubais and Deputy Prime Minister Oleg Soskovets to back the loans-for-shares idea.


Potanin is said to be a strong boss. One financial analyst said of Uneximbank that "The management style is one of intense internal competition. They have two banks, three investment banks, two share-issue operations ... All of these are run by very tough, outspoken people who are good at their jobs. And they fight like hell. But, apparently, at Unexim board meetings, when Potanin, the chairman, lifts up his hand, everyone shuts up."


"He had this vision of a bank a few years ago, and he has been able to implement it," a second analyst said.


What then, exactly, did Uneximbank come to be?


According to a profile done by Commersant Daily -- the only such profile to appear in the Russian press -- the United Export-Import Bank was registered and received its banking license April 20, 1993. Uneximbank, as it came to be known, was the indirect successor of Vnesheconombank, the Soviet banking entity which had held the accounts of "practically every foreign trade organization of the U.S.S.R."


Vnesheconombank collapsed along with the Soviet Union in December 1991, and much of its money simply disappeared. Two banks -- Mezhdunarodny Moskovsky Bank (International Moscow Bank) and Vneshtorgbank -- reportedly inherited Vnesheconombank's mantle, along with many of its employees. By the beginning of 1993, according to Commersant, International Moscow Bank was Russia's third-largest commercial bank, while Vneshtorgbank had adopted 50 percent to 70 percent of Vnesheconombank's clients. Both were eclipsed, however, with the formation of Uneximbank.


The business newspaper put forth two possible versions of the bank's origins. According to the first, Uneximbank was formed by the clients of International Moscow Bank and Vneshtorgbank -- Russian foreign trade entities and their foreign partners who wanted their "own" bank.


The alternative version is that Uneximbank was the offspring of the International Financial Company, a foreign trade firm which received its banking license in 1992, inheriting an estimated $300 million to $400 million in assets that had been held in another Soviet foreign trade entity -- the International Bank for Economic Cooperation.


The International Financial Company -- properly known as the IFC-Moscow Partners financial-investment company -- received its banking license in 1994. According to Commersant, it is one of the major participants in the Finance Ministry currency bonds market.


According to a third Western financial analyst who asked not to be named, Uneximbank and the International Finance Company, despite having separate balance sheets and focuses, are today, in essence, one bank -- by far Russia's largest. IFC won the Dec. 7 loans-for-shares auction for 51 percent of the Sidanko oil company; its bid was backed by Uneximbank.


"That is one of the reasons [Uneximbank] appeared to come from nowhere," he said. "If you put the two together, it's been the biggest bank in Russia for some time. But by splitting it up, it's kept a very low profile."


Uneximbank apparently received a lot of help in getting started at the beginning of 1993. Then-Finance Minister Boris Fyodorov, a key player on Yegor Gaidar's reformist team, and his nemesis, then-Central Bank chief Viktor Gerashchenko, put aside their shooting war over monetary policy to expedite the licensing of the new bank. According to the Commersant profile, the Finance Ministry and Foreign Trade Ministry also lent a helping hand.


In short order, Uneximbank received government authorization to sell state Treasury bills, and to be an agent for their payment. Indeed, 1994 was a very good year for the young bank. The Moscow city government picked it for services for centralized foreign economic relations; in September, Uneximbank was licensed to conduct operations with gold and other metals.


In early 1995, it became an authorized bank of the Federal Bankruptcy Commission.


Last May, Switzerland's Federal Banking Commission gave Uneximbank permission to open an affiliate in Geneva. This new bank, called Banque Unexim (Suisse), is the first Swiss bank to have been founded wholly on Russian charter capital.


"It's not like having a branch in the Cayman Islands, or some place like that," said the financial analyst. "They have a former chairman of the Swiss National Bank as their representative. This is a guy who used to run Switzerland's central bank, one of the world's most respected. For a Russian bank ... It's an amazing coup."


Long before the loans-for-shares scheme, Unexim was branching out into other businesses and into industry. Interros, a "financial-industrial group" linking the Uneximbank and the International Finance Company, was established in October 1994. The group has holdings in mining, metal processing, automobile manufacturing, transport, food processing and retail distribution. Interros reportedly worked closely with the huge Microdin retail distributor during the course of privatization: Both bought large chunks of the Zil auto manufacturer.


Also within the Interros umbrella is Energia, which was formed by 15 banks and insurance companies to finance projects in the power industry, ferrous metallurgy and agribusiness.


"This is a classic Russian FIG [financial-industrial group], with a bank at the nucleus, and a strong management support group in the form of Microdin," said one investment banker, who requested anonymity. "And they have extensive relationships with the military-industrial complex through Energia."


While the obvious monopolistic characteristics of Uneximbank and its affiliates, as well as their apparently cozy relationship with Russian officialdom, may not suit the Western palate, many observers say the bank is bringing a dynamism to Russian industry clearly absent among Soviet-era directors.


A test case of the bank's ability to manage industrial enterprises is currently taking place at Norilsk Nickel. The winners of loans-for-shares auctions hold them in trust, gaining legal ownership only in September 1996, and only if the government does not repay its loan. Thus Norilsk's management is arguing that Uneximbank does not yet have legal possession of the shares.


Uneximbank, however, is trying to use its 38 percent of stock to take control of management, and has been trying to convince the trade unions representing the company's workers, who hold 10 percent of Norilsk's voting shares, to provide backing in return for higher wages.


For some observers, the battle is a healthy development for Russia. "I think it's a really good development, because it's the first time that we have an issue of who controls the company -- management or shareholders," said Dan Lubash, director of Emerging Markets/Europe at Merrill Lynch in London.


Uneximbank's obviously privileged position within Russia's political power structures is clearly part of its strength, but some observers think it may also prove to be the bank's weakness.


"Right at the moment it's one of the most powerful banks, but I'm not sure what will happen in view of the changes that are taking place in the power structures of Russia," said a Russian analyst, who asked that his name not be used.


"It gained a lot in loans-for-shares, along with Menatep to some extent, and all the other banks were losers, and the Russian banking community is not happy with this fact. Also important is the fact that, as far as I understand, Uneximbank was supported by the State Property Committee and Chubais."


Chubais, of course, has since been fired as first deputy prime minister for the economy, to be replaced by a new generation.