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. Last Updated: 07/27/2016

Russia Puts $1.8Bln Into Yugoslav Offshores

Banks from Russia and the Yugoslav republic of Montenegro did 10 times more business with each other in 2000 than they did in 1999, according to the Interfax Economic Analysis Center.

Based on correspondent accounts, Interfax EAC estimates that Russian banks placed $1.8 billion in Yugoslavia in the first four months of the year — second only to U.S. banks. Russian banks, however, only attracted $1 billion from Yugoslavia.

"The growth and volume of operations is surprising and clearly exceeds the requirements of trade turnover," said Interfax EAC general director Mikhail Matovnikov. The State Customs Committee data show turnover between the two nations at just $300 million last year.

An expert with the research center Rating said Montenegro was a convenient offshore zone. "It is possible to conduct necessary, profitable operations and not violate Central Bank [regulations]," he said.

The Central Bank more closely monitors transactions involving the 47 countries and 23 territories that are on its 1999 offshore list. When conducting these operations, for example, significant reserves must be formed. But Yugoslavia is not included on the list, though conditions for bankers are very favorable.

The profit tax for offshore banks in Montenegro is 2.5 percent, and it has agreements waiving double-tax treaties with 21 countries, including Russia. If a bank's operations all take place offshore, then it is not subject to monitoring.

The Central Bank refused to explain why Yugoslavia was not blacklisted. Matovnikov said an exception might have been made for political reasons. The expert from Rating, who asked not to be identified, said a "powerful banking lobbyist" had organized the loophole.