Russia

Corporate Treasury & Banking in Armenia, Azerbaijan, Georgia, Kazakhstan & Uzbekistan

Report date: 
26 May 2026

Commentary

The end of empires. With our usual exquisite timing, CompleXCountries held a call to discuss the Caucuses and Central Asia in the very week that China’s President Xi Jinping chose to remind the renowned and erudite classical scholar, Donald J. Trump, that this is an issue which goes back to classical Greece.

This region is not only the site of the ancient Silk Road, which China has been trying to revive for over two decades, but it has also changed hands between the Ottoman Empire and Russia.  Many populations still speak Turkic languages, and, as became apparent, Russian is still the main international language, despite the end of the Soviet Union. With recent events in the Persian Gulf, China’s Belt and Road initiative may still be transformative.

For most MNCs, the region today does not reflect geopolitical tensions: the countries are true “frontier markets”: in all the countries discussed – Georgia, Armenia, Azerbaijan, Kazakhstan, Uzbekistan – only one foreign bank has a presence, and that is limited to Citibank’s office in Kazakhstan. HSBC pulled out of Armenia in 2024. MNCs have to work with local banks, and need local teams to manage the relationships. Peers even have to use local payment acquirers. 

Economically, these countries are generally stable, but not booming. Azerbaijan is the exception with its oil industry. Hard currency is readily available. Remittances out of the region are an issue due to the burdensome bureaucracy which accompanies them, not because of restrictive exchange controls and shortages of hard currency.

One skill, however, is essential to manage business and treasury in these countries: an ability to communicate in Russian, which is still used much more in the region than English. Many of the local banks have web sites which are only in Russian, or have few, if any, staff, who speak English. Every peer on the call has at least one staff member who speaks the language.

Operating issues:

  • Many peers sell from an offshore entity. This simplifies the remittance issue: locally, they often have a representative office. Some peers manufacture the in region, but this is usually restricted to one or two countries.
  • Peers generally found the local banks to be quite ....Please Login / Register to read the rest of this Commentary.
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Topics covered in this report: 
Cash Repatriation, Hedging FX, FX, Bank Relationships, Investing, card acquiring, PSP
Service providers discussed in this report: 
Citi, HSBC, OTP Bank, ABB (Azerbaijan), Unibank (Azerbaijan), Kapital Bank (Azerbaijan), Adyen, KDB Bank Uzbekistan, Halyk Bank (Kazakhstan), Pasha Bank (Azerbaijan), Bank CenterCredit/BCC (Kazakhstan), Ipoteka Bank (Uzbekistan), Yapi Kredi, Ardshinbank (Armenia)

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Geopolitics and Contingency Bank Relationships in Corporate Treasury

Report date: 
11 May 2026

Commentary

How to run an efficient global treasury and cash management system, while keeping risk under control?

This dilemma is becoming increasingly acute. In the past, treasurers focused mainly on counterparty risk – the danger that a bank might fail, or decide to exit a specific market. This risk is still present, but today the real concern is geopolitics. One month before this call, we held a session on banking in the Gulf and the Middle East, where the peers had been happy with progress in cash management, banking systems and the economy. By the time this call took place, they were worrying about the physical safety of their teams in the region, and the very uncertain outlook.

As one peer put it: by centralising cash management and reducing banking relations, we have moved the risk from the individual banks to the system.

Traditionally, risk is managed by building redundancy. If you sell healthcare products into Russia or Iran, you are usually exempted from trade sanctions. But your core relationship international banks are not – so it is prudent to set up accounts with banks you can fall back on if needed.

This makes sense, but it brings challenges. In addition to increasing KYC requirements, the extra accounts often require local teams, the banks are often difficult to integrate into global cash pooling systems, and the global banking spend is further diluted, making it even harder to manage wallet share amongst the banks.

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Topics covered in this report: 
Bank Accounts, Bank Relationships, Political Risk, Risk - counterparty, Sanctions
Service providers discussed in this report: 
Citi, HSBC, JP Morgan

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Corporate Treasury Approaches to Managing Geopolitical Risk

Report date: 
8 Mar 2024

Commentary

Geopolitical risk, or simply political risk, is a major challenge for treasurers. We had all become used to viewing Iran, North Korea and Myanmar as off limits, and handling issues in Venezuela and Argentina. But the Russian invasion of Ukraine and escalating trade tensions between the US, the EU and China have made the world a more dangerous place.

This call was scheduled at the request of one member, who was looking for ways to measure political risk, or at least get external indicators they can use to convince management to tread carefully. More on that below. But we quickly moved to discussing what to do, once you have identified the risk. After all, if management wants to do business in a risky country, treasury has to make it happen. 

Generally, peers participated in senior level discussions on strategy and objectives, but felt their main contribution was through managing the balance sheet:

  • Cash repatriation: the main way treasurers can reduce immediate risk is by repatriating restricted and trapped cash. This often involves a cost: withholding tax in the case of dividends, or creating accounting losses on currency conversion. Tax departments and CFOs have to be persuaded this is the right thing to do. Several participants regularly circulate the amount of trapped cash by country to the business, and even the board of directors: this helps change attitudes.
  • Change the business model: this is more difficult, but it can involve moving to invoicing in hard currency to reduce FX risk, or moving to selling through remarketers. One participant has moved from a single manufacturing location in China to multiple production sites in different regions. This was partly due to COVID disruptions and supply chain concerns, but it also addresses the potential exposure due to increasing tensions with China. 
  • Change the funding structure: in some markets, participants have moved from funding via intercompany loans from offshore locations to onshore external borrowing. This reduces the net exposure – provided the company is willing to walk away from the local debt in a crisis. In turn, that raises a series of issues – but at least, it gives more options. It is often more expensive.
  • Manage the accounting exposure: some

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Topics covered in this report: 
Cash Repatriation, Funding, Political Risk
Service providers discussed in this report: 
BNP Paribas, Economist Intelligence Unit, Brown & Brown, Bloomberg

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Approaches to Investing Trapped Cash

Report date: 
2 May 2023

Commentary

All international companies put a lot of effort into avoiding having cash trapped in emerging countries. But, despite our best efforts, there are still situations where cash accumulates in places from which it can’t be repatriated. This quickly becomes a lose/lose situation for the MNC: often the countries involved have high rates of inflation, and usually provide low rates of return on bank deposits – or even no return at all. So the cash loses its economic value, while counterparty risk quickly becomes an issue, over and above the sovereign risk concerns. Further, depending on the company’s accounting policies, exchange losses can negatively impact reported profits, as the local currency depreciates.

The purpose of this call was to discuss how to make the best of this bad situation – to look for ways of managing the issue.

  • Generally, there was consensus that standard risk management approaches continue to apply. No-one is prepared to ignore their usual principles.
  • However, there was consensus that some flexibility may be appropriate. The question is – how much?
  • The first problem is bank deposits: all participants preferred to continue to use international banks, even if they often provide lower rates than local ones. The counterparty risk issues with local banks were not viewed as sufficient to offset any increased return.
  • Most participants were in favour of putting pressure on the international banks to increase rates: in Latin America,  the European banks were generally viewed as being more responsive than their American counterparts, with Santander being used frequently: BBVA was
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Topics covered in this report: 
Trapped cash
Service providers discussed in this report: 
BBVA, Santander

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Transacting with Sanctioned Countries

Report date: 
27 Mar 2023

Commentary

At CompleXCountries, it is our mission to provide a forum where treasurers can openly discuss issues and share experiences. We then publish the essence of the discussion, but in a format which respects the need for confidentiality – though it is valuable general information, there is no upside to telling the whole world your specific company has had a problem with Bank A, or that you find country B’s exchange control regulations difficult to handle.

Sanctions pose an additional problem – and, of course, they are very topical at the moment. The problem is simple: while everybody is anxious to comply with all the rules and regulations, there are always situations which require some element of judgment, or where the rules are not totally consistent. With sanctions, the main issue which arises is that some trade continues to be permitted, usually for humanitarian reasons, and generally involving medical products. But, while medical products can still be sold to Russia and Iran, for example, most banks refuse to handle the cash settlements related to these transactions. 

There can also be inconsistencies between different sanctioning regimes: the US still applies sanctions against Cuba, while most other countries do not. Even for Russia, members tell us the EU’s sanctions list is not fully identical to that of the US. 

To avoid potentially repeating legal considerations we cannot verify, we have decided not to produce a detailed report of our discussions, but to provide a list of the general conclusions and things to watch out for. The items below do not constitute legal advice, but rather, a list of things to beware of. As always, treasurers and their companies are responsible for ensuring compliance with all relevant and applicable laws, and obtaining professional advice.

  • Most international banks will not handle even legal transactions with a sanctioned country. 
    • They have generally shut down their operations there, and so no longer have the resources or expertise to ensure compliance
    • The risk/reward ratio is not symmetrical. The financial benefit of processing these transactions is greatly outweighed by the potential penalties – regularly going into the hundreds of millions of dollars – for a single compliance failure. One French bank paid a $6bn fine several years ago.
    • This can mean that cash left over from former operations in a sanctioned country can
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Topics covered in this report: 
Sanctions

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Treasury & FX in Russia

Report date: 
30 Jan 2019
  • Documentation – complex, time consuming & critical
  • Inter banks – 2 way pooling is available in theory but not at all straight forward in practice
  • Find hedging banks- operating outside to inside
  • Sanctions are very specific – details are key and need to be looked at closely
Topics covered in this report: 
Cash Pooling - cross border, Hedging FX, Sanctions, Zero balance accounts
Service providers discussed in this report: 
Rosbank, VTB, Sberbank, PNC, Commerzbank, SWIFT, LexisNexis, Citi

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Winding Down Russia: Treasury Challenges

Report date: 
29 Apr 2022

Commentary

This was our third call on the situation in Russia. It focused on the practical challenges people are facing: nearly all participants are either running down their businesses or continuing on humanitarian grounds for products which are exempted from sanctions, particularly in the healthcare sector. However, as one participant put it, winding down is easier said than done.

Many businesses operate through franchises in foreign countries. Terminating the franchise agreement may not be enough to stop them continuing the business and using the brand name – some high profile companies which have stopped operations still have franchisees who are continuing to trade, using the name.

In some cases, the name remains on the business. This makes it difficult for the brand owner to walk away, as the reputational risk remains.

People in the healthcare sector feel a need to carry on for humanitarian reasons. For them, there are significant logistical challenges getting new shipments into the country: no flights, very little sea freight, so heavy dependency on road transport, with limited willing suppliers. They are encountering an additional issue: sanctions apply based on customs codes, and some health care products have not been appropriately coded.

In other sectors, companies continue to sell down their existing inventory – but even this can be complicated, as fresh inputs can be required to make goods saleable.

Still other participants have operations which are purely local, and do not require imports. These will typically continue to function, though moves are being made to make them fully independent.

Despite all the above, most participants continue to be able to pay down intercompany debt, pay dividends and settle outstanding intercompany invoices.

Cash operations are complicated by the need to segregate payments emanating from sanctioned banks. Again, this seems to work, and customers are usually willing to transfer their payments to non sanctioned banks.

Many Russian entities have taken steps to disguise their real ownership as a means of evading sanctions: some participants are using a database to identify the true beneficial owners to see whether sanctions apply.

Most international banks continue to function, but SocGen recently announced it is selling Rosbank. This raises the concern it may be sanctioned in the future.

Most international banks are refusing to open new accounts, and none is interested...please sign in to continue reading 

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Topics covered in this report: 
Hedging FX, Risk - reputation, KYC, AML, Sanctions, FX, Bank Relationships, payroll, Supply chain, Dividends
Service providers discussed in this report: 
Société Générale, Rosbank, Raiffeisen, Unicredit, Intesa, Citi, HSBC

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