Inside a Soviet Bank

Article excerpt

Eugene V. Uljanov's New York office is rich with symbolism. Behind his desk is a framed color photograph of George Bush and Mikhail Gorbachev at this year's Malta summit-evidence of warming relations between the U.S. and the Soviet Union.

And then, outside of his twelfth floor office is a handsome view of midtown Manhattan, the heart of the nation's financial center. This is the market that Uljanov's bank must cultivate. Doing so requires undoing long-standing political and economic resistance.

Uljanov is executive vice-president of Vnesheconombank-known in English as the Bank for Foreign Economic Affairs of the U. S. S. R. The Moscow-based bank opened a representative office in New York in July 1989, making it the first Soviet bank to establish a physical presence within the U.S.

The state-owned institution is one of five specialized Soviet banks that focus entirely on a specific market. "We practically have a monopoly on international banking, " says Uljanov. "If any [Soviet] enterprise wants to be involved in a joint venture with a foreign company or borrow funds abroad, it needs to apply for a license from our bank. " Global doings. The bank has about $120 billion in assets and operates 10 domestic branches. In addition, it runs representative offices in Zurich, Buenos Aires, Cairo, Bombay, Istanbul, and Budapest. Its influence is also felt throughout Western Europe because it is a major shareholder in six Soviet banks with foreign charters.

One of these, Donau Bank, Vienna, shares the New York office with the Bank for Foreign Economic Affairs. "Sometimes Donau Bank, operating under Austrian laws, may be interested in a number of transactions which are probably not of immediate interest to the Bank of Foreign Economic Affairs," says Uljanov, also an executive vice-president with Donau. "And sometimes we try to find new business for Donau. " One example of the type of deal Donau would pursue would be a joint venture involving U.S., Austrian, and Soviet interests.

Can/can't do. Originally formed in 1924 as the Bank of Foreign Trade of the U.S.S.R., the Bank for Foreign Economic Affairs was renamed and restructured in January 1988 as part of President Gorbachev's economic reform program of perestroika. Uljanov says that legal and political issues had kept it out of the U.S. market until last year.

"Looking back to the banking laws in the U.S. up to 1978," he says, "there was a clause of reciprocity. If we opened an agency or branch, we would have to permit equal rights for American banking institutions in the U.S.S.R. Up until very recently, no foreign banks were allowed to have full banking business there, though it was possible to have representative offices. "

The recent improvements in U.S.-Soviet relations encouraged a trip to the U.S. by the bank's executives in November 1988. Six months later, the bank received approval from the New York State Banking Department and moved into its current office three months after.

As a representative office, Uljanov explains, the bank "is not allowed to be involved in direct banking. We're limited to promoting business relations between the banking community here and in Moscow. We also assist corporations involved in trading relationships with our country, as we are the experts on the financing side. "

The bank is currently studying whether to upgrade its status to a branch or to assist its business by creating a trade finance company. "If we are going to make more investments, we need to realize what potential profit we'll gain, says Uljanov.

However, in its current status the five-person staff finds itself quite busy "One of the problems we have here is that we don't have enough time, " Uljanov adds. "I have a list of banks that I'd really love to meet with to discuss financial programs."

Uljanov reports the bank has reviewed a number of offers, including several projects focused on the hotel industry and the creation of an investment fund for U. …