Russian banks and businesses are opening en masse in Donbas and Crimea: what are the reasons?

Russia is actively expanding its economic presence in the temporarily occupied territories of Ukraine by opening new branches of state-owned banks such as Sberbank and VTB. However, most of the Kremlin's companies are still wary of entering these markets due to the low solvency of the population.

This was reported by the Financial Times. The Kremlin is encouraging Russian companies to do business in the regions seized since the beginning of the large-scale invasion.

However, despite the imposed sanctions and the risks associated with operating in war zones, two of Russia's largest state-owned banks, Sberbank and VTB, have begun to expand their operations in these regions. Sberbank, in particular, has opened 48 new branches and 130 ATMs in southern and eastern Ukraine. In Mariupol, a city that was severely damaged during the fighting, six mobile branches have been set up. However, despite the opening of the branches, Sberbank had previously suspended its operations in Crimea in 2014, but has now reopened an office on the peninsula.

During a meeting with representatives of the financial sector, Russian President Vladimir Putin called for more active entry into the occupied regions. "Everything you feared - sanctions - has already happened. So what do you have to fear anymore?" Putin said, encouraging business expansion in these territories.

VTB also announced plans to serve customers in the temporarily occupied territories by the end of 2024, opening a new branch in Luhansk in July this year. However, many Russian entrepreneurs are in no hurry to follow suit, in part because of concerns about possible Western sanctions and the high risks of doing business in conflict zones.

Most Russian companies are avoiding entering the markets of the temporarily occupied territories, in particular Donetsk, Luhansk, Kherson, and Zaporizhzhia regions, because of the low solvency of the population and high risks. "Smart companies will not go there - it is simply unprofitable. Solvency is low there, with mostly pensioners and civil servants. The risks are high," said a representative of the Russian retail sector.

For many years, large Russian retailers, banks and other businesses have been wary of opening offices and stores in regions such as Crimea, Donetsk and Luhansk. However, Sberbank returned to Crimea, opening a new office in 2023, after ceasing operations in 2014.

Companies operating in the occupied territories face difficulties, including supply and transportation. For example, after announcing the launch of Russian online marketplaces in these areas, companies such as Ozon and Wildberries quickly abandoned their plans due to the lack of proper logistics and transportation. Residents of these areas are forced to rely on unofficial courier services to receive goods, which further complicates the situation.

As OBOZ.UA reported earlier, Chinese banks have almost completely stopped accepting direct payments from Russia due to fears of being subject to international sanctions . Only 2% of financial institutions accept money from the aggressor country.

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