The European arm of Russia’s VTB Bank has signed an agreement with the African Export-Import Bank (Afreximbank) as part of plans to expand trade finance activities in Africa.

The agreement allows VTB to use a wide range of Afreximbank trade finance products, supporting Russian exporters seeking to enter the African market.

Speaking to GTR, Igor Ostreyko, managing director of trade and export finance at VTB, says: “What our customers need is support in new markets. We have already established relationships with local financial institutions, especially in North and Sub-Saharan Africa, but for the new markets where VTB is not present yet, this agreement will help our customers cover the risk of going into these new regions. Afreximbank will help us build relationships with local financial institutions to make trade happen.”

The agreement falls within the framework of Afreximbank’s trade confirmation guarantee programme, under which Afrexim takes direct risk on African banks by confirming letters of credit issued by them on behalf of African importers.

“VTB Bank has supported a lot of commodity and agriculture trade, as well as some infrastructure projects and equipment supply,” says Ostreyko. “These deals are mostly in the northern part of Africa, as the main Russian trade partners today are Egypt, Algeria, Morocco and Tunisia. This agreement should help us offer our clients access to new regions in Africa.”

Ostreyko explains that the agreement provides for different ways of structuring trade finance deals, dependent on the market need and counterparty profile. “For some transactions, Afreximbank will take the risk on the transaction and we can do the financing, while for others, we can share the risk,” he says. “Through this agreement, we can support our customers through a letter of credit or guarantee which will allow them to deliver products to the African continent. The main goal is to support trade with the new markets.”

This is not Afreximbank’s first link-up with a Russian entity. Last year, it entered a partnership with the Russian Export Centre (REC) to collaborate on African aviation projects, with plans to expand this work to cover the mining, agro-processing, railways and metals sectors. With trade turnover between Russia and Africa exceeding US$20bn in 2018, up 17% versus 2017, this latest agreement looks to be one of several as the two sides strengthen their collaboration in trade and investment.