Moscow is expected to meet this week to discuss a possible multibillion dollar bailout of state investment bank VEB.
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For years, Vladimir Putin used Vnesheconombank (VEB) to pay for "special projects," from the Sochi Olympics to covert acquisitions in Ukraine to oligarch bailouts.The cost of its bailout could reach 1.3 trillion rubles ($18 billion), according to several senior government officials, ballooning the budget deficit at a time when plunging oil prices are forcing spending cuts.Over the past eight years, VEB came to epitomize Putin's hybrid system that combined elements of market financing with tight Kremlin control, funding billions in industrial and infrastructure projects back in the days when oil prices were high and foreign credit was easy.When the global financial crisis struck in 2008, VEB became Putin's main tool for managing the shock. It got 1.25 trillion rubles (worth about $50 billion at the time) from the government and central bank to shore up the plunging stock market, help failing banks and bail out tycoons who were facing the loss of their companies to foreign creditors.Some of VEB's bailout investments even paid off, boosting the bank's profits. Foreign credit was plentiful and VEB's implicit government backing made borrowing cheap.
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