On Friday morning, as Russian troops and tanks began encircling Kyiv, the Minister for European Affairs Thomas Byrne disclosed on radio that Alfa Bank, the largest private financial institution in Russia, would be subject to economic sanctions.

Unlike Russia’s biggest banks, which are state-owned and cut off from western debt markets, Alfa Bank had been immune from previous sanctions and had access to the capital markets. As we reported earlier this month, much of that process was routed through IFSC shelf companies.

Accounts filed to the end of 2020 show that one of its Irish vehicles, Alfa Holding Issuance, had $619 million worth of bonds outstanding and corresponding loans to the group, out of a rolling programme of up to $1.2 billion.

Another, Alfa Bond Issuance, also runs a rolling programme to raise up to $5 billion in loan participation notes and, at the end of 2020, had built up $3.7 billion worth of them on its balance sheet through regular issuances. This money was all lent on to Alfa Bank in Moscow.

Last year, this Irish special purpose vehicle raised $880 million from bondholders in a combination of dollars and rubles as older notes matured – and it was getting ready for more.

VTB Bank, which is majority-owned by the Russian state and has interests in banking assets across eastern Europe, has assets totalling €225 billion. Along with other firms owned by the Russian state, it lost access to the EU’s capital markets as a result of the 2014 sanctions. Those sanctions remain in place, and it has been the subject of further sanction in recent days.

Thomas spent time investigating the company’s money trail. Essentially, the bank spent seven years shuffling assets around Europe. Unsurprisingly, significant assets landed in Dublin, including its €3 billion commodities trading desk.

VTB Commodities Trading’s latest accounts for 2020 show that its balance sheet had grown to $3.3 billion, with half of its assets in loans and advances to customers and another $778 million worth of commodities in storage or in transit on its books.

As Thomas reported: “The Irish-registered, Swiss-operated company had $85.3 million in net revenue that year, mostly buoyed by trading income and fees but dragged down by its loss-making financing business. Although it generated an operating profit of $43.2 million, a $93.2 million impairment on its credit business left it with a pre-tax loss of $50 million.”

Rosneft is Russia’s state-controlled oil and gas conglomerate.  It established an Irish subsidiary called Rosneft International as early as 1996. When The Currency examined its Irish operations in January, we discovered a complicated network of entities stretching from the British Virgin Islands to Cyprus to Hong Kong.

Rosneft International’s longest-established role is that of an intermediary holding company between Rosneft’s headquarters in Moscow and a group of subsidiaries in Cyprus. These include Rosneft Worldwide Projects, a clearing house used to conduct mergers and acquisitions of various units within the group in recent years from the Mediterranean tax-efficient jurisdiction.

In parallel to its Irish holding structure, Rosneft also came to Dublin in 2012 to tap the bond markets through a separate company, Rosneft International Finance.

As Thomas reported: “The Irish Special Purpose Vehicle first issued $1 billion of five-year bonds and $2 billion of 10-year bonds listed on the Euronext Dublin exchange. The $2 billion series, which carried interest at 4.199 per cent, falls due in March this year. Rosneft International Finance International has advanced equivalent loans under the same terms to its ultimate parent in Russia.”

These are three examples of Russian funds flowing through the IFSC. There are others. The mining group Norilsk Nickel, for example, has been raising bonds through a Dublin Section 110 company called MMC Finance DAC. It had a stock of $3.75 billion bonds listed on Euronext Dublin used exclusively to fund Norilsk Nickel, according to its most recent accounts.

Russia’s largest bank, state-owned Sberbank, has also based some of its aircraft leasing operations in Ireland. The business known as SB Leasing Ireland posted 58 active leases, including 29 aircraft in operating leases at the end of 2020. State Transport Leasing Company (GTLK), the largest leasing company in Russia, has significant assets registered in Dublin also.

None of this, of course, is all that surprising. Back in 2020, Trinity College Dublin (TCD) academics Dr Jim Stewart and Cillian Doyle published a paper entitled “Financing Russian firms: Ireland and round-tripping.” It revealed that more than €100 billion has been funnelled through the IFSC to Russian companies between 2007 and 2015, including entities linked to major state-backed companies and individuals, some of which are the subject of European sanctions.

The revelations were first reported by the Business Post, which I edited at the time. Commenting at the time, Stefan Gerlach, an economist who was deputy governor of the Central Bank of Ireland in the aftermath of the crash, placed the numbers within the context of Dublin’s role in the international money markets.

“When I was in Ireland, there seemed to be a general feeling in the political sphere that a large financial sector was indisputably good because it generates well-paying jobs and tax revenues for the government. That is a little too simple,” he said.

“It’s hard to police the financial sector, particularly if it is large, and there are clear downside risks. I don’t think this is fully understood. There’s been too much focus on the obvious benefits of a large financial sector, and too little focus on the hidden risks.”

Since the period  covered in Stewart and Doyle’s research, the activity has slowed down due to international sanctions in the wake of Russia’s annexation of Crimea. However, as the various investigations by Thomas in recent weeks have highlighted, Dublin remains a location of choice for many Russian companies.

For now, the focus is rightly on the sad plight of Ukraine and its people. But Ireland needs to reflect also, and question why it has allowed Russian money to flush its way through the IFSC for so long and if it has done enough to monitor it. We knew it was happening and we allowed it to happen, but we know little about much of it.

*****

On Thursday, Tom wrote a sad yet powerful piece entitled: “Settlements and secrets: How a paedophile was allowed free rein at Terenure College.” It centres on the private school and John McClean, who was sentenced last year to eight years in prison for the abuse of 23 boys at the school between 1973 and 1990. As the school begins to make settlement offers to survivors, Tom asks how Terenure College allowed “a bully and a creep” to amass such power long after the first allegations emerged. The piece is outside of the paywall.

Businessman Paul Mackay battled Charles Haughey over his finances and was a founding member of the Progressive Democrats. More recently, he has sought to highlight the massive erosion in value at the Irish Credit Bureau. He told his story to Tom Lyons.

Build-to-rent homes are politically controversial, with opponents arguing that high rents mean too many remain vacant. However, an analysis of 63 fully completed rental developments by Ronan Lyons showed this is not the case.

It built a reputation as the cheapest, most effective space on the internet to place ads but Facebook has lost its ability to target users with ninja precision. Now, Irish businesses are turning their backs on the social media behemoth. Rosanna had the story.

The decision to give Aramark the catering contract for the National Gallery has drawn the ire of several artists over its management of direct provision centres. On Wednesday, I examined how it was performing.  It did not paint a positive picture. Revenues have stagnated, while losses have mounted. The company remains solvent on its balance sheet, but this is due to sizable capital injections from its parent company over the years as opposed to residual profits.

Sinead O’Sullivan was intrigued when she learned vintage cars had delivered a ten-year return of 288 per cent. There was just one problem: She knew nothing about cars. So began her journey into the world of cars as an asset class, as detailed in her column last week.