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Kremlin Equity Fund May Get World Bank Backing, Pankin Says

The Russian private equity fund that President Dmitry Medvedev is creating may get World Bank guarantees to lure foreign investors and expertise, Deputy Finance Minister Dmitry Pankin said.

The fund may start with as much as $10 billion of capital and be managed by VEB, or Vnesheconombank, the state development bank overseen by Prime Minister Vladimir Putin, Pankin said in an interview in Moscow on March 16. The fund will allow Russia’s government to share risks with foreign investors and help “modernize” the economy, Medvedev said in January.

“If VEB is issuing some kind of instrument, then it will be guaranteed by the World Bank,” Pankin said. “This money will be channeled to the private equity fund.”

Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein met with Medvedev in Moscow this week to discuss the U.S. bank’s possible participation in the fund, according to the Kremlin’s website. Pankin said details of the fund’s structure and size are still being discussed.

Goldman is one of 23 banks helping Russia manage its $34 billion privatization program over three years and Blankfein is among the 27 executives Medvedev named to a board advising the Kremlin on how to turn Moscow into a global financial center.

Other board members included Jamie Dimon of JPMorgan Chase & Co., Citigroup Inc’s CEO Vikram Pandit, Bank of America Corp.’s Brian T. Moynihan, Morgan Stanley’s John Mack, Deutsche Bank AG’s Josef Ackermann and Blackstone Group’s Stephen Schwarzman.

$5.3 Billion

Marina Vasileva, a World Bank spokeswoman in Moscow, declined to comment immediately, as did Timothy Krause, senior regional manager for financial markets at the International Finance Corp., the World Bank’s lending arm. Ekaterina Karasina, a VEB spokeswoman, also declined to comment immediately.

Since 1993, the World Bank’s banking lending arm has invested $5.3 billion in Russia, including $1.5 billion in syndicated loans, according to its website. The IFC is set to complete the purchase of a 15 percent stake in Otkritie Financial Corp. in “days”, the Moscow brokerage’s Chief Executive Officer Roman Lokhov told reporters in London yesterday.

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