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Liquidators of the European arm of VTB Bank have accused Angola of defaulting on a loan after the lender’s Russian parent was hit by sanctions, according to two people familiar with the matter.
Frankfurt-based OWH, the former VTB Europe, has launched arbitration proceedings against the African country to repay the loan, the people said. It is seeking to recover money on assets that were held in the subsidiary and severed from state-owned VTB by western sanctions on Russia.
The case underlines how, years on from Russia’s invasion of Ukraine and with hopes of a peace deal now rising, the complex fallout from sanctions on Russian banks still haunts countries that once borrowed from Moscow.
Angola disclosed in documentation for a bond issue in December and January that it is fighting a legal claim of default on a debt where all of the lenders had been subject to sanctions, but it did not identify the entity or the loan involved.
OWH, which is no longer subject to sanctions and has been ringfenced from its Moscow-based parent, declined to comment.
Angola’s finance ministry declined to comment on the identity of the entity taking legal action mentioned in the bond documentation. It added that it was “willing to disclose more details . . . as soon as there is a resolution to it, to avoid speculation and to inform all stakeholders, at the right time, on how [it] will be resolved”.
The mystery over the claim of default has perplexed investors at a time when President Joao Lourenço’s indebted government is trying to regain access to global bond markets — after the country was hit by high US interest rates and a drop in oil prices — and drive down its double-digit borrowing costs.
Angola issued nearly $2bn in bonds in December and January and has used the debt as security for a $1bn loan from JPMorgan. Officials have said they plan to sell more debt.
The exact size of the debt that OWH claims it is owed is unclear.
VTB lent billions of dollars to Angola since 2012 as part of a push by the Russian bank into Africa, but much of this borrowing had been repaid by 2019.
However, Angola also borrowed $278mn from VTB’s former Austrian branch and Russian state-backed lenders Vnesheconombank, Roseximbank and Gazprombank in 2011 to buy a communications satellite supplied by Rosoboronexport, Russia’s state arms and aerospace exporter.
The satellite loan was due to be repaid last year. By then, all four original lenders had been targeted by US or other sanctions.
Angola disclosed in bond issuance documentation up until 2022 that it still owed $200mn to VTB Bank Austria, which became part of VTB Europe. This disclosure did not appear in documents for the latest debt sale.
German regulators ringfenced the operations of VTB Europe, which had thousands of German depositors, in 2022 following sanctions on the Russian parent.
Renamed OWH, the subsidiary was removed from the US sanctions list in April last year and is now in liquidation. OWH also has a licence under the UK sanctions regime that allows it to receive payments.
“The existence of international sanctions, particularly as they relate to Russian entities, has caused legal and practical difficulties in the performance of such commitments, as Russian counterparties themselves have acknowledged,” Angola’s finance ministry said.
“The fact is that there is an arbitration process under way in which two parties have different understandings on the same matter,” it added.
VTB Bank said that it “has no claims against the government of Angola” and that it is not responsible for any actions by OWH’s administrator, after the bank lost control over the unit on what it called “totally illegal grounds”.
Vnesheconombank and Gazprombank did not respond to requests for comment. Roseximbank declined to comment.
