Russian state banks open branches to eastern Ukraine

Russia has opened branches of its biggest state banks in Mariupol and other cities, consolidating its grip on the newly occupied parts of Ukraine.The Kremlin is encouraging companies to enter Ukrainian territories that were seized by force at the beginning of its full scale invasion 2022. Sberbank, and VTB are two of Russia’s largest state-owned lenders. They have started to enter those regions, despite the fact that many companies still fear western sanctions, and the risk of doing business in a conflict zone.

Sberbank was sanctioned by the west in 2022. According to Financial Times, it has opened 48 locations and 130 cash machines in what Moscow calls its “new regions” of eastern and southern Ukraine. This includes full-format branches. Sberbank said it had already served 70,000 customers and planned to expand business in the region.

Vladimir Putin, the president of Russia, told state-owned companies in 2013 that they had “nothing fear” if they set up business in occupied areas.Putin told Russian leaders in the financial sector, “You have to go into these territories with more enthusiasm and begin working there.” “Everything you feared – sanctions – has already happened. What’s to fear?After occupying the regions by force, Moscow claims that Donetsk and Luhansk in Ukraine are constitutionally part Russia. The Russian government does not control the entire territory it claims and continues to try to take more regions that are internationally recognized as Ukraine by force.

Last month, Ukraine launched a lightning surprise offensive in Russia’s Kursk Region, seizing large swathes of land. Both sides are trying to maximize their territorial gains before any peace talks.Human rights activists, politicians and Ukrainians who were forced to flee areas occupied by Russia spoke out about abuses such as torture and arbitrary arrests that are carried out with little oversight in the “new region”.

The Russians also point out the various ways in which Moscow has tried to “Russify”, including the changing of textbooks, the removal of Ukrainian monuments and the introduction high-street banks.Sberbank has opened a half dozen “mobile offices”, including one in Mariupol. Russian forces destroyed the city in the early months of the invasion and killed tens thousands of people.

VTB, also under sanctions since 2022 has announced that it will begin servicing clients in brick-and-mortar office locations in Mariupol before the end of this year. In July, its chief, Andrei Kostin was photographed cutting the ribbon at a branch in the occupied Ukrainian town of Luhansk.

This is not just another office. The state news agency Tass cited Kostin as saying that this is an important step in the integration of the region into the economy of the country.Up until recently, Russian banks, retailers and other large companies were wary about working in areas like the Crimean Peninsula and the Donetsk-Luhansk region of eastern Ukraine that Russia controls since 2014.

Sberbank, meanwhile, has returned to Crimea. It opened its first office in the peninsula last year.Prior to this, banks in the peninsula were only able to provide services if they were specifically assigned tasks that might lead them into sanctions from the west, like the Promsvyazbank, which is geared towards the defence industry. PSB is the first bank to have entered newly occupied territory and has almost 400 branches in Donetsk, Luhansk.

There are now other consumer businesses in the occupied territory, but the Russian retail chains with a name recognition still hesitate to enter the market.A person from the Russian retail industry said, “Sensible business won’t go there – it’s not worth it.” “The purchasing power of the residents is low. The majority are pensioners and government workers. The risks are high. “Even in Crimea, a completely different situation, only a few companies have entered.”

Western sanctions may be imposed on companies that work openly in occupied zones.

The Russian Amazon equivalents Ozon and Wildberries were named by the Russian-installed Donetsk Region head Denis Pushilin in March, but both companies quickly denied the claims, citing the lack of logistics and transport infrastructure.

Residents of occupied zones have relied instead on a courier service that sends goods to southern Russian addresses, where local entrepreneurs drive the parcels to occupied areas. Trade is coordinated via the Telegram app on social media, with customers paying a 15% markup for delivery.

This summer, Promsvyazbank launched its own online marketplace, PSB Market. It only works in areas that are occupied. The platform sells western products such as iPhones and Adidas sneakers, and Oral B electric toothbrushes. However, it is clunky, and appears to be rushed compared to the more user-friendly Ozon or Wildberries. Prices are also higher, especially on consumer technology.

Russian brands can display their patriotism by opening branches in occupied territories. Black Star Burger is a restaurant franchise co-owned with Kremlin-supporting rapper Timati. In June, the chain announced it would be opening outlets in Mariupol as well as in Kherson.

In 2023, according to Russian tax data, over 2,500 companies had been registered in “new regions”. The “new regions” are believed to be a mixture of newly-established businesses and reregistered or confiscated businesses.

Since the occupation, many Ukrainians have fled their homes and found that their businesses were seized by other people. This could be new owners in the area or Russians.First Republican Supermarket has been the leading grocery retailer in the occupied zones since 2023. The chain now has more than 70 stores in the Donetsk area.

The chain was owned by Ukrainian retailer ATB-Market before the Russian occupation. The Russian corporate registry lists Natalia Zakharchenko as the owner of the chain. She is the widow of Alexander Zakharchenko who was killed by an explosion in 2018.

Ukrainian investigators who monitor developments in the occupied territory say that the retail sector and the business environment in the region, in general, are still very similar to the wild west economics of the post-Soviet 1990s.

Oleg Baturin is an investigative reporter from the Kherson area. He told Krym Realii that the situation was chaotic. The occupying force brought everything to the same level as 35 years ago.