Report: Russian govt may set up new bank to fund defense industry

MOSCOW, Sep 13 (PRIME) -- Russia’s government is discussing an option to establish a new state-run bank to finance national defense industry, Bloomberg reported late on Tuesday citing sourced familiar with the situation.

“The new U.S. sanctions law threatens to cut off a vital channel for Russia’s funding of its massive defense buildup,” Bloomberg reported.

“Among the options the Russian government is considering to resolve the issue is the creating a new state-owned bank to finance defense spending or making the expenditures directly from the treasury.”

Much of loans are handled through state banks, which provide them to arms makers and are later repaid by the government. Sberbank and VTB handle about 90 percent of this lending, according to estimates from Vasily Zatsepin, an expert on defense spending at the Gaidar Institute, a Moscow think tank, Bloomberg said.

New sanctions law may cut off access to the U.S. financial system and seize assets held in the U.S., it added. The law’s provisions have led Sberbank and VTB, Russia’s main state-owned banks, to worry that the large loans they make to weapons producers could expose them to such sanctions, crippling their business.

End