German regulator strips Russian bank VTB of control over subsidiary

Germany's banking regulator on Sunday said it had stripped Russia's VTB of control over its European subsidiary as sanctions hit the second-biggest Russian bank over the war in Ukraine. 

German regulator strips Russian bank VTB of control over subsidiary
The VTB headquarters in Frankfurt am Main. Photo: dpa | Hannes P. Albert

The Russian group “no longer has control” over its Germany-based subsidiary VTB Bank SE after a ban on exercising its right to vote, financial markets authority BaFin said in a statement. 

The regulator said VTB can no longer access the financial assets of its subsidiary, which is now “completely isolated” from the Russian group. 

The European entity’s activities can continue, but its board cannot follow directives from VTB, which was placed on an EU sanctions list on Friday. 

A ban on transferring funds to “VTB group entities” has been in force for “several weeks”, BaFin added. 

VTB had already been hit by US sanctions and excluded from the international SWIFT banking system. 

Russia’s largest bank, Sberbank, has faced sanctions since February. Its Austria-based European subsidiary faces the possibility of liquidation amid serious cash flow problems. 

BaFin added that VTB’s operations remained “unchanged” and that clients could still freely access their deposits. 

According to German business daily Handelsblatt, four of VTB Europe’s five board members have recently resigned and the company has taken on no new customers since early March. 

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ANALYSIS: Just how quickly could Germany wean itself off Russian gas?

A new report from the German Institute for Economic Research claims it could be possible for Germany to be free of its dependence several months earlier than the government claims. Here's how that could work.

ANALYSIS: Just how quickly could Germany wean itself off Russian gas?

Prior to the war in Ukraine, Germany got 55 percent of its gas imports from Russia and was due to double import capacity with the Nord Stream 2 pipeline. 

As tensions mounted, however, Chancellor Olaf Scholz pulled the plug on the project and since the start of the war, Germany has been trying to find alternatives to Russian gas. At the latest estimates, around 47 percent of Germany’s gas comes from Russia. 

What measures have already been taken?

As the war in Ukraine has escalated, the German government has been seeking alternatives to Russian gas, such as building new liquified natural gas (LNG) docking stations, making deals with other gas suppliers – such as Qatar – and encouraging households to be frugal with heating their homes. 

READ ALSO: Germany to ‘fast-track’ gas terminals as part of Qatar deal

Despite these measures, German Economics Minister Robert Habeck recently said that he still assumes that Germany will need until mid-2024 to become independent from Russian gas. 

Is there no way to speed this up?

There may be. According to a new report by the German Institute for Economic Research (DIW), Germany could actually manage to do without Russian gas by the end of 2022. 

“If the energy savings potential is maximised and at the same time supplies from other natural gas supplier countries are expanded as far as technically possible, Germany’s supply of natural gas will be secured even without Russian imports in the current year and in the coming winter of 2022/23,” the study says.  

READ ALSO: Germany activates emergency gas plan to secure supply

How could this be done?

The study states that a faster departure from Russian gas dependency does not mean that Germany has to build its own LNG terminals. Instead, the existing ones in the Netherlands, Belgium and France could be used to transport more liquefied natural gas to Germany via the European pipeline network. This, it claims, could eliminate more than a quarter of Russian imports. 

The report also advocates ramping up natural gas imports from traditional supplier countries such as Norway or the Netherlands, and claims that more imports from Norway alone could save about one-fifth of the current Russian imports by more than 50 billion cubic meters per year.

More efficient use of the German and European pipeline system to connect Germany with southern Europe, where supplies arrive from North African countries such as Algeria and Libya, could also ease the situation in the future.

“Admittedly, the additional supply is not sufficient to replace all of the previous Russian natural gas imports,” the DIW admits but, if combined with a decline in natural gas consumption, then Germany’s energy supply would be secure.

Demand could be reduced by between 18 and 26 percent – for example, by completely replacing natural gas in power generation, which the study claims could eliminate up to half of Russian supplies.

In the case of private households, the use of natural gas can only really be saved by reducing demand. Therefore, the report says that energy-saving campaigns are needed as soon as possible, and “measures that increase energy efficiency and facilitate the switch to renewable heat (in combination with heat pumps) must be implemented as soon as possible.”

READ ALSO: Why Germany has urged households and businesses to cut back on gas