Ukraine has created an 'artificial conflict' with Russia, VTB Bank chief says

  • Ukraine's president has created an "artificial conflict" with Russia just to boost his chances in a presidential election set to happen in Ukraine in March next year, the president and chairman of Russia's VTB Bank has claimed.
  • "I think you should look for somebody that benefits from this and actually it's Mr Poroshenko, the president of Ukraine, definitely," Andrey Kostin told CNBC on Wednesday.
Ukrainian soldier stands guard aboard military boat called 'Dondass' moored in Mariupol, Sea of Azov port on November 27, 2018. - Three Ukrainian navy vessels were seized off the coast of Crimea by Russian forces, which fired on and boarded Kiev's ships after several tense hours of confrontation. Here's what is known about Sunday's incident.
SEGA VOLSKII | AFP | Getty Images
Ukrainian soldier stands guard aboard military boat called 'Dondass' moored in Mariupol, Sea of Azov port on November 27, 2018. - Three Ukrainian navy vessels were seized off the coast of Crimea by Russian forces, which fired on and boarded Kiev's ships after several tense hours of confrontation. Here's what is known about Sunday's incident.

Ukraine's president has created an "artificial conflict" with Russia just to boost his chances in a presidential election set to happen in Ukraine in March next year, the president and chairman of Russia's VTB Bank has claimed.

"I think you should look for somebody that benefits from this and actually it's Mr Poroshenko, the president of Ukraine, definitely," Andrey Kostin told CNBC at VTB's Russia Calling Investment Forum on Wednesday.

"The original idea of his was to postpone elections as it looks from public opinion polls that he won't perform very well, so creating this additional tension that has led to a martial law (and to a situation) where he might extend his presidency," he told CNBC's Julianna Tatelbaum.

"That's our point of view, it's a very artificial conflict," he said.

Kostin's comments come as the international spotlight has once again fallen on Russia following its seizure of three Ukrainian naval vessels, and 23 crew members, on Sunday. The incident happened in the Kerch Strait, a channel that separates the Sea of Azov and Black Sea, to the south of Ukraine and Russia.

Ukraine said the incident was an "act of aggression," while Russia said the ships had entered its territorial waters illegally. Both sides accuse the other of violating the conditions of a 2003 treaty that enshrines free access to the Kerch Strait and Sea of Azov.

Ukraine's president has responded by declaring a 30-day period of martial law in certain parts of the country, specifically in districts bordering Russia. He also said there is a threat of Russia staging a land invasion.

VTB's Kostin said that Ukraine's President Petro Poroshenko was manufacturing the conflict ahead of a presidential election due end of March 2019, however.

"We've lived like this with Ukraine for years now and now all of a sudden, just a couple of months before elections, this has happened," he said.

CNBC got in touch with Ukraine's presidential office to respond to Kostin's comments but has yet to receive a response. President Poroshenko told NBC News on Tuesday that Russia would "pay a huge price" if it attacked his country.

New low

The latest episode marks a new low for Russia and Ukraine. Relations between the neighbors have been frosty, to say the least, since Russia annexed Crimea from Ukraine in 2014 and supported a pro-Russian uprising in east Ukraine in the same year – although the Kremlin denied any involvement.

Needless to say, Russia's actions provoked international condemnation and a range of U.S. and European sanctions targeting individuals, entities and certain sectors (including financial, energy and defense), were imposed on Russia.

These were extended recently until various points in 2019 and the latest provocation with Ukraine certainly won't help to persuade the U.S. and Europe from potentially extending punitive measures designed to punish Russia and anyone else seen to have played a role in the Ukraine crisis.

VTB Bank has not been unscathed by Ukraine-related sanctions either, and neither has Andrey Kostin, who is seen as a close associate of President Putin, are both subject to sanctions.

As a designated government officials leading a state-owned Russian bank, VTB's Kostin was placed on a U.S. sanctions list in April 2018, along with a group of Russian oligarchs, government officials and entities, due to what the U.S. Treasury department called "worldwide malign activity."

Kostin blamed the U.S. sanctions on a misunderstanding," however, told Russian state news agency TASS at the time that he had done nothing wrong and had always tried to foster good working relations with U.S. banks and investors, Reuters reported earlier this year. In May, Kostin told CNBC that he had perhaps been put on a sanctions list mistakenly.

"I am listed as the senior government official," he told CNBC's Geoff Cutmore in May. "Which I'm not of course, I'm the chairman of the one of the leading commercial international listed bank and the malign activity which was mentioned and included Ukraine, hacking Syria, or undermining American democracy, which has nothing to do with this of course, and all the banking community all around the world knows me as a banker," he said.

Earlier on Wednesday, Riccardo Orcel, head of VTB International, told CNBC that the bank would deal with fresh, or extended, sanctions if that happened.

"We've been working in full compliance of the sanctions and in the last three years we developed our M&A business, our capital market business with transactions serving clients in many parts of the world so of course we need to see what will be the result of recent political events but in full compliance of rules, regulations and sanctions we hope we can continue our business."