• Russian bank VTB hopes closer ties between Beijing and Moscow will enable the lender to expand further into China
• The two neighbours have sought stronger economic ties following Western sanctions on Russia over the Ukraine crisis and China’s trade war with the US

Russian bank VTB is betting on a closer relationship between China and Russia to help drum up new business, as the two country’s look to strengthen their economic ties to make up for deteriorating relations with the United States.

Russia has been looking to deepen its relationship with neighbouring China after Western nations, led by the US and the European Union, imposed sanctions on certain sectors of the economy and on individuals over Moscow’s 2014 annexation of the Crimean Peninsula.China, meanwhile, has been keen to strengthen ties with Russia in multiple spheres in the midst of a bruising trade war with the US.

Geopolitical issues have weighed on the Moscow-based VTB, which was added to a US sanctions list in 2014 and has been forced to cut its operations in London as a result of Brexit uncertainty. Its business also took a hit in the city due to souring relations between the United Kingdom and Russia last year following the poisoning of former spy Sergei Skripal and his daughter Yulia in Salisbury, which British authorities blamed on Moscow. Russia has denied the accusations.

Riccardo Orcel, deputy chief executive and head of international business at VTB, said the bank’s exposure to China was limited, but it was keen to expand its business, including in areas such as financing cross-border takeovers and cross border payments.

“For VTB Shanghai, we accelerated the development plan two years ago – that plan will be completed at the end of the year with the move to our new office premises,” he said in an interview in Beijing.

Concerned with breaching US sanctions on Russia, many Chinese banks are wary of supporting Chinese companies doing business in Russia, even when it comes to covering the basics, like sending payments, Orcel said. He added VTB could step in to provide services here.

On top of cross border transactions, takeover deals are also a target for the state-controlled bank.In 2017, VTB agreed to lend 6 billion euros (US$6.6 billion) to CEFC China Energy for the Chinese conglomerate’s US$9 billion acquisition of a stake in Russian firm Rosneft, one of the world’s top oil producers and exporters, although the deal fell through after CEFC chairman Ye Jianming was put under investigation by the Chinese authorities for suspected economic crimes.