Meet The Obscure Russian Bank Helping Venezuela Defy U.S. Sanctions

A new Bloomberg report has exposed deepening Russian-Venezuelan ties as the Nicolas Maduro government attempts to thwart aggressive U.S. sanctions amidst continued economic collapse while cut off from the global economy. Bloomberg names a little known Moscow-based state-run bank called Evrofinance Mosnarbank as a "key player" based on high level sources with direct knowledge of the bank's role in giving Venezuelan companies access to the outside world, confirmed by recent statements of Caracas officials themselves. 

It's not the first time the obscure bank has made headlines as last May it was revealed to be the world's only financial institution to sponsor Venezuela's experimental and now already in trouble before official launch state-backed cryptocurrency - called the petro - allowing investors to buy the petro by wiring a minimum of 1,000 euros to a Venezuelan government account at Evrofinance.

The bank is increasingly involved in Venezuelan markets, with its unique capital structure set up to delicately evade punitive oversight mechanisms while tapping into alternative markets  something said to be the brainchild of Vladimir Putin and the late Hugo Chavez — especially useful now as Maduro is forced to depend on the likes of Turkey, China, Russia and Iran.

The Evrofinance Mosnarbank building in Moscow, via VOA News

And now Bloomberg reveals the following

Evrofinance Mosnarbank, which is jointly owned by Russia and Venezuela but not subject to sanctions itself, has been tapped by the Maduro government as an alternative to handle payments to its suppliers. What’s more, officials in Caracas are urging local banks and companies to channel international transactions through Evrofinance, according to people with direct knowledge of the matter

Without Evrofinance's financial pipeline, transactions as simple as importing and exporting goods or wiring money to international companies or individuals are becoming increasingly impossible. According to the report, the tighter US sanctions have become the more emboldened Evrofinance's activities in the pariah state become. 

For a prime example of how the Moscow-based bank has remained "unmoved by these concerns" Bloomberg details the following:

In at least two meetings in the past month, central bank officials have told local private banks that they need to open Evrofinance accounts in order to take part in currency auctions, according to two people who participated in the discussions. Those auctions are now swapping bolivars for euros, yuan and other currencies instead of U.S. dollars, Economy Vice President Tareck El Aissami said last week.

And the report further cites unnamed sources with direct knowledge of the situation to say authorities are increasingly directing the oil sector toward the Russian bank. Bloomberg cites: "state oil giant Petroleos de Venezuela SA’s contractors are also being told to open accounts with Evrofinance to receive payments abroad, according to two people with direct knowledge of the situation."

The only official statement that Bloomberg received on the matter after contacting Venezuela's central bank and PDVSA, as well as the bank itself was from Evrofinance. The bank said in an email statement that its recent observable growth was “mainly due to shocks to the banking sector such as the rehabilitation of lenders and revoking of licenses from large players on the market,” but didn't comment directly on Venezuela when asked. The statement continued: “An influx of clients from troubled banks due to these circumstances, as well as favorable fees, settlement speed and attractive interest rates for deposits, has had a positive impact on the bank’s performance.”

Essentially Russia and Venezuela perceive themselves as fighting a common bully in the form of American-led sanctions, so likely more Western pressure will push them further into a united front. Russia has already provided Caracas with billions in debt relief while being a lead investor the the state oil industry. 

For its part Venezuela's government purchased a 49 percent stake in Evrofinance in 2011, transforming it into a vehicle for binational trade and investment projects with almost $800 million in assets, according to Reuters. Russian state-controlled VTB and Gazprombank hold the rest of the shares - though these are under sanction by the US and Europe after the Russian annexation of Crimea.

Likely, the more visible Evrofinance becomes as a prime international financial vehicle in Venezuelan markets, and the more that local officials go on record directing contractors and Venezuelan companies its way, the more likely it is that the resulting headlines make it target #1 for the US Treasury Dept. and European regulators.