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GTR Leaders in Trade 2023: The winners

GTR speaks to Rudolf Putz, head of the EBRD’s Trade Facilitation Programme (TFP), about the bank’s programme, his group’s activities in Russia, and its expanded ability to support inter-regional trade as a result of its recent successful trade facility underwritten by a consortium of leading insurance companies.

Russia is the European Bank for Reconstruction and Development’s (EBRD) largest single client by far. In 2006, the EBRD’s activities in Russia amounted to €1.8bn, a sum that represents approximately 38% of the EBRD’s total 2006 activities.

This portfolio growth is in line with the bank’s larger strategic goal to reach a steady 40% of its activities directed towards Russia. The 2006 figures are up from 2004 when according to the bank’s annual report its Russian activities accounted for 30% of total investments with 37 projects worth €1.2bn in new lending and investments.

GTR speaks to Rudolf Putz, head of the EBRD’s Trade Facilitation Programme (TFP), about the programme itself and his group’s progress in the region.

 

GTR: What was the number of trade finance deals done in 2006

RP: A total of 1,134 transactions were completed under the EBRD Trade Facilitation Programme (TFP).

 

GTR: What was the total volume of these deals in 2006

RP: A total of €707mn was transacted under the programme.

 

GTR: What was the total volume and number of transactions specific to Russia in 2006

RP: In total, some 308 transactions amounting to €363mn were supported under the TFP.

 

GTR: Can you provide some details regarding the extent of interregional trade between Russia and the CIS countries in 2006

RP: One goal of the TFP is support for intra-regional trade, not only helping to create jobs but also to support the restoration of traditional trade links. In 2006, the EBRD facilitated under the TFP 234 intra-regional trade transactions between EBRD countries of operation in Eastern Europe and the CIS, including 77 intra-regional trade transactions between Russia and other EBRD countries of operation, including a total of 61 intra-regional trade transactions between Russia and other CIS countries.

A very positive trend is the growth in intra-regional trade between EBRD countries of operation, and presently this trade accounts for already about 20% of all TFP transactions that occurred in 2006, specifically 234 transactions out of a total of 1,134 in 2006.

 

GTR: Can you provide an example of a typical transaction that is occurring between Russia and other CIS countries

RP: A good example of an intra-regional transaction between Russia and other CIS countries in 2006 was Tojiksodirotbank’s issuance of a €35,200 letter of credit to Fortis Bank for the import of Russian made Indesit refrigerators and washing machines by a Tajik importer.

While western confirming banks used the programme in the past mostly for financing of exports from their countries to Eastern Europe and the CIS, they have now started to support also trade between EBRD countries of operation. The refrigerators and washing machines were produced in a factory of Indesit’s in Lipetsk, Russia, and imported by a small distributor of household appliances in Dushanbe, Tajikistan.

 

GTR: GTR recently reported the importance of trade finance lending as a means to access international capital markets by Russian banks. How important is trade finance to the Russian regional banks, for example to Rostov (Center-Invest Bank), Ekaterinburg (Uralvneshtorgbank), Novosibirsk (Sibacadembank), Nizhniy Novgorod (NBD Bank), Kazan (Spurtbank), Chelyabinsk (Chelindbank)

RP: The number of trade transactions and the trade volumes of Russian regional banks are steadily growing. These regional banks are also benefiting from trade finance advisory services and trade finance training courses provided by the EBRD with funding provided by the European Union and the government of Ireland.

Since the trade finance demand of Russian regional banks already exceeds the risk-taking capacity of foreign commercial banks, export credit agencies and the EBRD, the EBRD signed on November 1, 2006 an insurance policy underwritten by Ace Global Markets and Lloyd’s insurance syndicates, which has enabled the EBRD to increase its TFP facility limits for Center-Invest Bank Rostov, NBD Bank Nizhniy Novgorod, Sibacadembank Novosibirsk, Uralvneshtorgbank Ekaterinburg.

In addition, the Netherlands Development Finance Company (FMO) shares risk under the TFP facilities for NBD Bank Nizhniy Novgorod.

 

GTR: Can you elaborate on this recent cooperation with these insurers and how this has impacted on the TFP

RP: The new €183mn EBRD-led trade facility was underwritten by Ace Global Markets (AGM), which is leading the group of insurers, and by Catlin Syndicate 2003, XL Syndicate 1209 and Kiln Syndicate 510 at Lloyd’s of London.

The backing by the syndicate group will enable the EBRD to double its exposure for selected issuing banks in Azerbaijan, Georgia, Moldova, Russia, Tajikistan and Ukraine, where the demand of trade finance exceeds the risk-taking capacity of foreign commercial banks, export credit agencies and the EBRD.

This support is a significant new development in trade finance. It will allow the EBRD to increase its risk-taking capacity to further develop trade across the CIS, which can support economic growth and create jobs.

 

GTR: How will this expanded capacity in the TFP be used

RP: It will be used to finance more import and export transactions and to support also private second tier banks and regional banks in countries, in which the demand for trade finance exceeds the risk-taking capacity of foreign commercial banks, export credit agencies and the EBRD.

 

GTR: There has been massive and rapid growth in the EBRD’s Trade Facilitation Programme specific to Russia. Can you please provide relevant statistics specific for the Russian market between 1999 and 2006

RP: Yes, certainly, the number of transactions has grown from three in 1999 to in 2006, and the business volume has increased from €5.26mn to €363.05mn over the same period.

 

GTR: What is the number of foreign trade transactions and the cumulative total value of Russian transactions covered to date under the TFP

RP: Since the start of the TFP in 1999 the EBRD has financed 1,090 foreign trade transactions of Russia in the total amount of more than €1.3bn.

 

GTR: What are your plans and expectations for 2007

RP: Under the TFP we expect further growth in the number of transactions and business volumes in line with the development of the programme over the past years. This growth will be driven by the continued economic growth in most of the EBRD’s countries of operation, growing trade volumes, high commodity prices and the growing number of financial institutions joining the TFP as issuing banks, confirming banks and co-financing partners.

In 2007, we expect to see also a further growth of domestic and international factoring activities. The EBRD is planning to support the development of factoring through loan and guarantee facilities and has already employed consultants, who advise the EBRD’s client banks and factoring companies in Russia, Serbia, Georgia and Moldova in the development of their domestic and international factoring activities. These projects are financed out of funds provided by the governments of Italy and the European Union.

Demand for financing in local currency is growing in most EBRD countries of operation, and during 2007 we are planning to offer financing under the TFP in Russian roubles.

More information about our progress in 2007 can be obtained from our latest report – ‘TFP Achievements so far’. Most tables and graphs in this document, which can be obtained directly from the EBRD, include results for 2006.