DBSA denies Russian bank deal

• Development bank statement contradicts VEB.RF

The Development Bank of Southern Africa (DBSA) has denied signing agreements with its Russian counterpart, VEB.RF — which is under US sanctions — regarding the opening of credit lines in national currencies.

In a statement released on Thursday, the DBSA said its chair, Ebrahim Rasool, and CEO Boitumelo Mosako took part in an annual meeting of banks to discuss co-ordination during the Brics summit this week, but “no credit line was signed” with the Russian state development bank.

The statement contradicts an announcement by the chair of the Brics Interbank Co-ordinating Mechanism (ICM), Igor Shuvalov, at the opening plenary meeting of Brics leaders on Wednesday in Kazan, Russia.

Igor told the meeting that members of the ICM had approved revised framework agreements with partners and “we have signed agreements on credit lines in national currencies with China and SA. We expect Brazil and India to join this document.”

VEB.RF is under US sanctions as a result of Russia’s invasion of Ukraine in 2022, which prevents the bank from making or receiving international payments via the Swift international payment system, effectively freezing its access to international finance. That prompted Russia to spearhead the development of a new currency, possibly backed by gold.

CREDIT FACILITIES

ICM members signed a memorandum of understanding on a local currency line in 2015 to serve as a guide for member countries to make credit facilities available to each other.

The subsequent sanctions against Russia have called into question the implementation of the memorandum.

Shuvalov is now the chair of VEB.RF and is also under sanctions by the US. He previously served as first deputy prime minister under Russian President Vladimir Putin.

The ICM meeting, held on the sidelines of the Brics summit, was used as a platform to revise its framework to include new members of the intergovernmental group. The meeting is the first since Brics agreed to extend membership to more nations at the 2023 summit in Joburg: Iran, Egypt, the United Arab Emirates and Ethiopia.

The additional members were also expected to be signatories to the ICM, Shuvalov said.

The ICM was established in 2011 by Brics to strengthen and develop trade and economic relations among members’ financial institutions and enterprises. The mechanism also enables the countries to reduce dependence on the dollar, increasing trade and investment flows among themselves using their currencies.

CO-OPERATION

Members of the ICM include the DBSA, VEB.RF, the Brazilian Development Bank, the State Development Corporation, Export-Import Bank of India and China Development Bank.

In the Kazan declaration adopted by Brics countries on Wednesday, members committed to enhancing financial co-operation.

“We welcome the Brics ICM focus on facilitating and expanding innovative financial practices and approaches for projects and programmes, including finding acceptable mechanisms of financing in local currencies. We welcome a continued dialogue between the ICM and the NDB [New Development Bank],” the

declaration reads.

“We encourage strengthening of correspondent banking networks within Brics and enabling settlements in local currencies in line with the Brics cross-border payments initiative, which is voluntary and non-binding, and look forward to further discussions in this area, including in the Brics Payment Task Force.

“We task our finance ministers and central bank governors … to continue consideration of the issue of local currencies, payment instruments and platforms, and report back to us by the next presidency.”

Mark Burke, the DA’s spokesperson on appropriations, said the party had submitted a request for information to the DBSA under SA’s Promotion of Access to Information Act regarding its engagements and agreements signed at the Brics summit.

“The DA calls on Boitumelo Mosako as CEO of DBSA to urgently publish the meeting minutes from the VEB.RF engagement and any agreements signed in full.

“Failing that, we’ll require her to appear before parliament to account for the DBSA’s involvement at the Brics summit,” Burke said.