RUSSIA:
The imposition of sanctions on Russia is leading the country’s banks to
call for development of its Islamic finance provision, as an
alternative to funding from currently inaccessible options in Europe
and the US. The Association of Russian Banks has recommended that the
Bank of Russia, the country’s central bank, develop rules for Islamic
banking, a view echoed by Theodore Karasik, director of research and
consultancy at the Institute for Near East and Gulf Military Analysis
in Dubai, in a recent interview: “The Kremlin should move quickly into
the Islamic finance market as a way forward.”
Asia
has been identified as a target for financing by Russia. The likelihood
of the country gaining Islamic finance funding in particular from the
region is slim however, given the strained relations between Russia and
Islamic finance center Malaysia following the downing of flight MH017.
The development of the country’s own Islamic finance industry, with a
view to attracting investment from the Middle East is a logical step,
with banks such as AK BARS Bank, Sberbank and VTB Bank having already
expressed interest in Islamic finance and facing restrictions from the
EU and the US regarding the selling of bonds or shares in these
markets.
Islamic
finance activity in Russia has been present but infrequent and led by
the country’s Tatarstan region. In November last year, the
International Bank of Azerbaijan was granted a preliminary permit by
the Central Bank of Russia to develop Shariah compliant financial
instruments and in January this year, AK BARS Bank secured a US$100
million Murabahah Islamic financing facility.
Countries
within the region, including Azerbaijan, Kazakhstan, Kyrgyzstan and
Tajikistan have made moves to develop their Islamic finance provision
with support from the IDB; Tajikistan’s Islamic banking legislation
came into force earlier this month. In February, Dr Ahmad Mohammad Ali,
the president of the IDB was invited to discuss the development of the
country’s Islamic finance industry with banking officials; the success
of Russia’s move to develop its native Islamic finance provision, will
be rooted in its ties to the Middle East and OIC countries and their
support in the endeavor.
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