Irish-linked arm of Russian bank suffers withdrawal of partner support

The commodities-trading arm of Russia’s VTB Group has begun winding down its base-metal positions after financial partners withdrew support as the bank was targeted with sanctions and the potential exclusion from the SWIFT system. The Zug, Switzerland-based commodities-trading unit is part of VTB Commodities Trading Designated Activity Company, an Irish holding company.

VTB Commodities Trading closed off all its hedging positions in base metals late last week, according to people familiar with the matter, who asked not to be identified discussing private information. It acted after lenders gave it 24 hours notice to close the positions, said the people.

The move is the latest sign of how the Russian invasion of Ukraine is rippling through commodity markets. A raft of banks around the world have already stopped or restricted funding deals for commodities from Russia, limiting the flow of goods ranging from oil and metals to wheat.

A spokesperson for VTB Bank declined to immediately comment.

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In recent years, VTB had spearheaded an effort by Russian banks to fill a void left in commodities markets as their western counterparts scaled back, and its rapid expansion turned the company into a significant trader and financier in industrial metals markets. By 2016, it was trading about 200,000 tons of aluminium a year, and also had significant offtakes in other industrial and precious-metals markets.

Bulked up

The company bulked up further in metals in 2018 and 2019 with hires from Castleton Commodities in Zug and Singapore as well as MRI Trading and Levmet. The company will seek to complete its outstanding long-term contracts, said one of the people. These include an offtake deal for metal from Eurasian Resources Group's Kazakhstan Aluminium Smelter.

The UK Treasury issued a general licence under sanctions to allow for a 30-day wind down period for transactions involving VTB Bank. – Bloomberg