Russian corporates are increasingly looking to the debt capital markets for funding due to the high pricing of trade finance loans.

Speaking at Exporta’s sixth annual Russia and Eurasia trade and export finance conference, Gazprom Neft’s head of lending and structured finance Stanislav Popkov said the Russian lending market was of poor value in 2012, and that the overall figures were inflated and distorted by the jumbo loans of Rosneft.

He called on banks to compete with the offerings of the capital markets and with loans made by international finance institutions (IFIs) and covered by export credit agencies (ECAs). The single term, long tenor and low pricing of IFI and ECA-backed loans are no more than a “proxy for the debt capital markets”, said Popkov.

Popkov suggested that banks should be offering flexible instruments that the capital markets can’t compete with, such as prepayment schemes and drawdown schedules.

His sentiments were echoed by Ilya Krasnov, deputy head of corporate finance at iron ore producer Metalloinvest, who said that when pricing is such a concern for corporates, then the capital markets will remain a more competitive option than bank lending.

Danila Kotlyarov, finance director for Russia Petropavlovsk, another iron ore producer, said that for midcap companies such as his, the export finance market simply isn’t an option due to pricing and the reluctance of banks to lend. His organisation, which has operations in the far east of Russia, has been reliant on the Chinese ECA Sinosure for export and pre-export financing, since a large amount of its exports are gobbled up by resource-hungry Chinese firms.

In a poll taken of the audience – made up of corporates, insurers, trade financiers and risk management professionals – 79% confirmed that pricing is the most important consideration when attempting to secure funding. The banks that have been most successful in the market have been those with the lowest pricing – the highly liquid Japanese and US banks.

John De Lange, head of structured metals and energy finance, oil and gas at ING Bank, called on Russian banks to compete by partnering with international banks. He said that he expected 2013 to be a year marked by co-operation between banks from Russia and Europe, which may help both compete with “US and Japanese banks that are awash with cash”.