In a situation where oil-export proceeds are shrinking, it seems unlikely Russia will maintain its economic growth. At the same time, invigoration in Russia's industries depends primarily on investments in the goods-producing sectors of the economy.

This problem could be considerably relieved if Russian banks came out to play a more active role, but even a superficial review of the facts and figures leads to the conclusion that local banks had virtually withdrawn from financing the so-called "real sector of economy" by the of mid-1990s. Back in 1992, Russian banks accounted for approximately 10 percent of industrial investments in the country; in 1993 the figure dropped to below 6 percent, and slid further down to less than 1 percent between 1995-96.

No radical changes occurred in the situation after the August 1998 crisis. According to estimates made by experts from Russia's Ministry of Economic Development and Trade, investments in Russia's real sector totaled approximately 1 trillion rubles in 2000. Some growth in combined investments has taken place during the past several years, but the positive dynamics are definitely affected by what I would call "distorting effect," i.e. the very low volume of the previous years with which the present figures are compared.

According to some sources, owned funds of the enterprises constitute more than 80 percent of the total of main capital investments, and the remaining 20 percent come mostly from bank loans, share placement and loans from other companies.

The extremely low proportion of Russian banks investing in the real sector of the economy is easy to explain: The banks' assets are extremely low. For example, the list of Russia's 90 largest banks includes institutions with credit portfolios as low as 1 billion rubles ($36 million). At the same time, Russia's largest corporations are implementing modernization and development projects worth hundreds of millions of dollars.

In this situation, Russia's industries, first of all the export-oriented ones (fuel, energy, metals), have no choice but to seek foreign loans. But all the same, the proportion of foreign loans in the total of investments made in Russian industries is meager. The unwillingness of foreign banks to issue bigger loans to Russian enterprises has been discussed more than once. Everybody knows that the cause lies in the unpredictability of the Russian economic situation, the lack of transparency and poor legislation.

A lot of different forecasts are being made about the future role of foreign banks in the financing of Russian industries. Some experts say their share will increase, while others say it will reduce because the banks will find it more profitable to invest in other regions of the world. But the most interesting opinion – supported by facts and events taking place in Russia's industry domain – is the notion that the main reason for the reluctance of foreign banks to invest in Russia's industries lies in the excessive concentration and centralization in Russian industry and finance.

Some experts from the Moscow Interbank Currency Exchange say that financial-industrial groups have become the dominant type of structure in the Russian economy, and in each of them a bank is the key element. These groups (for example, Alfa Group, Menatep and Interros) are actively diversifying their businesses and are aggressively swallowing key enterprises in various sectors, be it in industry, agriculture or elsewhere. At the moment it is difficult to figure out what the real aims of such acquisitions are. Maybe they are really interested in these operations, or just want to have the market capitalization of these enterprises increased in order to resell them. By and large, there has been an increase in investments by Russian banks in the real sector of the economy. A leading role here is played by petrodollars, which are more profitably invested in Russian industries, rather than exported, as they were in the recent past.

Experts forecast a sharp increase in the share of Russian banks in crediting small- and medium-sized businesses in Russia, which have been given increased attention recently. First deputy chairman of the Central Bank Tatyana Paramonova said a lot of regional banks are now servicing small- and medium-sized businesses. According to Paramonova, regional banks pulled through the 1998 crisis with 10 times smaller losses than the big Moscow banks had, because the regional banks' assets consisted largely of credits issued to industrial enterprises producing goods demanded by consumers.

Because of the worsened situation on the world market and the economic invigoration in Russia, Russian banks are revising their policies on domestic industries, both in crediting and direct investment activity. At the same time, some experts and specialists maintain that the visible re-orientation of Russian banks in favor of the domestic economy does not mean they really want to finance the real sector of the Russian economy. Probably, this activity is a cunning trick by the slick bankers to save their assets – including their foreign assets – prompted by the moves of the Central Bank, particularly increased measures of control over offshore "oases."

(Anatoly Tkachuck is a free-lance writer specializing on banking issues. He contributed this comment to The Russia Journal.)