The Budapest-based International Investment Bank (IIB), which is majority owned by the Russian state, is in serious financial trouble. This can also be a problematic issue for Hungary, which is the second-largest owner of the bank after Russia.
According to hvg.hu, the bank’s financial problems started after Euroclear, which is one of the world’s largest securities transaction firms, blocked the Russian-Hungarian bank’s funds as part of the sanctions against Russia.
Hvg.hu has published a comprehensive investigative report on the case. They write that the bank’s funds have been frozen as part of the sanctions imposed after the outbreak of the Russian-Ukrainian war. According to the report, the bank is in serious financial trouble as a result, and there is a risk that it will soon become completely insolvent. This information is based on a leaked letter written by one of the bank’s executives. The letter was addressed to the bank’s management. As written by hvg.hu, the letter reveals that there was still a chance to unblock the funds last October, but later the Belgian Ministry of Finance intervened. As it is written in the letter sent in December, the bank’s leadership was already aware at the end of last year that there was no possible way to unblock the funds.
Hvg.hu also claims that other leaked documents have also come into their possession. In February, the bank was hit by a cyber attack, and several bank documents and correspondence were published on the dark web. Although the IIB denies their authenticity, hvg.hu believes they are real. One of the most interesting letters comes from Márton Nagy, Hungary’s Minister for Economic Development. As hvg.hu writes, the letter was addressed by the Hungarian minister to the Belgian Finance Minister. In the letter he asks the Finance Minister to unblock the IIB’s funds.
It is not certain whether the second letter is real, as none of the parties involved responded to hvg.hu’s inquiry. According to hvg.hu, however, the letter could easily be real, as Hungary is greatly affected by the issue.
Another document reveals that Hungary’s share in the bank would be increased. Hvg.hu sees a good chance that this document is real. After Bulgaria announced its intention to leave the bank last year, Hungary remained the only owner of IIB within the EU. The site highlights a statement made by Péter Szijjártó on this issue. In his statement, Szijjártó said that Hungary saw a chance to increase its share in the IIB since more and more countries decided to leave the bank.
However, the site also recalls the most recent statement of Gergely Gulyás, Minister of the Prime Minister’s Office. Hvg.hu recently asked a question about IIB, to which Gulyás replied that he did not know what the fate of the bank would be but it was in a difficult situation.
Short but clear little snippet on why Bulgaria pulled out of the International Investment Bank:
For completeness’ sake, Romania also pulled out ( https://www.romania-insider.com/international-investment-bank-pays-back-ron-bond ), as did the Czech Republic ( https://www.reuters.com/markets/rates-bonds/czechs-call-eu-allies-quit-soviet-era-banks-citing-security-2022-02-25/ )
A little it more on the IIB … As you may know, it relocated its headquarters from Moscow to Budapest in 2019. This move was even opposed by the Trump administration because “the bank’s presence offers no real economic benefits, while Russia can use the bank to expand its ‘malign influence over the region.’
Further context: Mr. Varga orchestrated the relocation, inter alia recognizing its “international legal personality” of the IIB, giving its directors and staff (50+) diplomatic immunity.
Moreover, our Politicians also agreed the IIB should not be subject to any financial or regulatory supervision or control in Hungary.
For all the right reasons, I’m sure!