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President of Russia Vladimir Putin: Mr Kostin, I have two questions. First, how did your public offering go? And second, you and I discussed this problem, but nevertheless, after analysing the current situation, how did the Cyprus problems affect your company and how is the work in Cyprus progressing?

Chairman and CEO of VTB Bank Andrei Kostin: Mr President, just today, we completed a share sale transaction for a large package of VTB shares worth 102.5 billion rubles [approximately $3.4 billion]. And I think it is no exaggeration to say that this was an unprecedented transaction for the Russian stock market – first and foremost, because the entire trading volume was sold in Russia and was invested into shares sold on the Moscow Stock Exchange.

You set this objective on January 25 of this year at a meeting on financial markets, and we have carried it out.

Vladimir Putin: You were afraid that doing it on a Russian platform would not give the expected results. So what are the results?

Andrei Kostin: Indeed, we were afraid because many experts – both Western and Russian – made dire predictions that we would be unsuccessful in this endeavour, saying that it would be difficult…

Vladimir Putin: Specifically because it is done on a Russian exchange, not in London?

Andrei Kostin: I have to say that this was, indeed, the first such transaction. All previous deals have mainly been in London. You are absolutely right. But I would like to note that in these four months, the Presidential Executive Office, the Cabinet and the Central Bank have done a great deal to improve the infrastructure of the Russian market in connection with your instructions. This included the legislative measures that have been taken, making it possible for us to make a public offering. We are working together with the Cabinet and the Central Bank to improve these issues.

I would also like to note one particular detail from this offering: the quality of the new shareholders. This is also unprecedented, even in global practice. We immediately had shares purchased by three sovereign funds, namely the sovereign fund of Norway, which became our largest shareholder, and sovereign funds of Qatar and Azerbaijan, which bought significant numbers of shares. In total, they purchased over half of the shares.

Vladimir Putin: How much did they invest?

Andrei Kostin: They invested between 15 and 20 billion rubles each in this offering. And there is a range of other very interesting investors from BRICS nations, particularly financial institutions from China and Brazil. In other words, I would say that we have a unique composition.

The reason sovereign funds are important is because they serve to signify the quality of a company. Because they invest in future generations and make very careful decisions about where to invest. This is a signal to other investors that if a sovereign fund goes in, others can follow.

We are approaching this cooperation holistically. We feel that these sovereign funds have just begun to cooperate with Russia. And they will engage in a fairly wide range of other activities in order to invest in other sectors, other entities and projects.

As for Cyprus, I would like to report that since May 13…

Vladimir Putin: Just a minute. Are you yourself satisfied with this work and the results?

Andrei Costin: Yes, very satisfied. And we are grateful for the assistance, and most importantly, the direction that you gave us. I think that this is a very good way to go. Naturally, I think it will become better and easier to work in Russia, and I think that’s absolutely justified. I believe other companies can now follow our lead.

Vladimir Putin: Nevertheless, we need to look into improving legislation to ensure that nothing stands in the way; we must create the most favourable possible conditions for investors who are channelling their resources into our companies. As you know, much still remains to be done. We need our trading platforms and our integrated exchange to be just as good as other international platforms, and even better than average for some parameters. With our partners’ experience at our disposal, we can take everything into account and implement it here.

Andrei Kostin: We are prepared to work with the Central Bank, the Cabinet and the Presidential Executive Office to use our experience for looking into further steps that should be taken in order for this to work effectively.

As far as Cyprus is concerned, since May 13 of this year, following the Cypriot government’s decision, VTB Bank and its subsidiary company, as well as other Russian banks, have resumed their work there. Restrictions have been eliminated on working with Russian and other international clients. And in essence, given the nature of our business, we can firmly say that neither we nor our Russian clients have suffered any losses. In many ways, this is due to the firm position taken by the Russian leadership and by you personally. We could sense that the Cypriots took anticipatory steps, I mean with regard to Russian financial institutions, especially those that were working completely normally and not experiencing any problems or difficulties.

Vladimir Putin: Ultimately, this is also in the interest of the Cypriot economy.

Andrei Kostin: Absolutely. I think that they also understand this. But the internal situation there has still not been fully resolved. As for our activities, there were many ominous predictions and many people in the West had stated that the Russian economy would suffer, the banks would suffer. But in fact, none of this has occurred; there has not been any negative effect on our banking sector.

Vladimir Putin: Very well. We will remain in contact with our European and Cypriot partners. But naturally, both you and your clients must nevertheless draw certain conclusions and have a layered system for protecting our interests.

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