27 Oct 2011 19:55

Deutsche Bank, BNP Paribas will no longer work with Belarusian govt

MINSK. Oct 27 (Interfax) - Germany's largest bank Deutsche Bank has announced it will no longer work with the Belarusian government for political reasons.

"Cooperation between Deutsche Bank and the Belarusian government has stopped. Deutsche Bank is not doing business with the Belarusian regime and it does not plan to change its position. This is Deutsche Bank global policy, including Deutsche Bank Russia," a spokesman for Deutsche Bank Russia told Interfax by phone.

The spokesman was unable to comment on the outlook for Deutsche Bank cooperation with the National Bank of Belarus and Belarusian commercial banks.

A Belarusian Finance Ministry official told Interfax "we have not had any official notification from Deutsche Bank. Our cooperation with this bank was limited to the fact that it was one of the former Eurobond issue organizers."

The National Bank of Belarus refused to comment on cooperation with Deutsche Bank. "We are not commenting on this issue for now," NBB Press Secretary Alexander Timoshenko told Interfax.

BNP Paribas also announced it was no longer working with Minsk. "After December 19 [the presidential elections] we stopped all our activities in Belarus, except trade related financing. Our only action was to close the transactions which we had committed to before December 19. To date we are not working on and do not plan any new transactions with the state of Belarus," a BNP Paribas spokesman is cited by Britain's Independent newspaper as saying.

A banker at one of the major Belarusian state banks is skeptical about the Deutsche Bank and BNP Paribas announcements. "There is no official announcement about a cease in cooperation with Belarus on the websites of these global banks. I do not know anything about the closure of their correspondent accounts in Belarusian banks," he said.

The semi-official nature of the announcements indicates that they want to avoid a final break in relations with Minsk, while maintaining the European Union's general political position with regard Belarus, the banker said. The London branch of Deutsche Bank is the payment agent and the listing agent for two issues of Belarusian Eurobonds totaling $1.8 billion. However, "Deutsche Bank itself did not allocate loans to Belarusian companies and banks, preferring to earn on intermediary services," the banker said.

Deutsche Bank together with BNP Paribas, Royal Bank of Scotland (RBS) and Sberbank organized a debut sovereign Eurobond issue for Belarus totaling $600 million with coupon yield of 8,75% per annum and maturing in 2015. A month later another $400 million in Eurobonds were issued with yield of 8.251% per annum. In January 2011, with the same organizers, Belarus issued $850 million in Eurobonds with yield of 8.95% pa., maturing in 2018. The Belarusian Finance Ministry is meeting its current coupon payment obligations in full.

Deutsche Bank Russia Managing Director Joerg Bongartz told the Belarusian press in February 2011 that the bank might organize the proposed BelAZ IPO. "Deutsche Bank is part of the working group to prepare for the BelAZ IPO. Opportunities for working in privatization have opened in Belarus and we have the chance to work as organizer and consultant," Bogartz said at the time.

Increased activity in Belarus at the start of the year is due to plans "to intensify dialog with the government and Belarusian companies that need international capital markets in the next few years. That is why we are holding talks with the corporate sector in Belarus," he added.

Bogartz did not then comment on the growing political and reputational risks linked to the sanctions that the European Union imposed in relation to Belarusian officials.

In a meeting with Russian Prime Minister Vladimir Putin, Sberbank Chairman German Gref said in September 2011 that Sberbank was ready together with Deutsche Bank to offer fertilizer company Belaruskali a $2 billion loan. The money was to replenish Belarus gold and foreign currency reserves, but the Belarusian authorities refused to meet Sberbank's requirement that a 35% stake in Belaruskali be used for collateral. As a result Deutsche Bank pulled out of the deal.

Now Minsk hopes Sberbank will independently provide a $1 billion loan before the end of 2011.

RBS announced it was ceasing cooperation with the Belarusian authorities in August 2011. The British Bank said it was stopping all transactions to raise capital on behalf of Belarus because of the sanctions, the country's political situation and because the country did not meet key elements of the IMF program.