Russia Offered To Buy Barclays Stake During Peak Of Financial Crisis

During the peak of the financial crisis when UK banking giant Barclays was struggling to avoid taking a U.K. bailout, the Russian government made a formerly unknown approach to the bank. According to a report by Bloomberg, Russia “signaled its intention” to take a 500 million-pound ($641 million) stake in Barclays according to minutes from an October 2008 finance committee meeting that were shown to a jury during a fraud trial of senior bank executives. That trial is ongoing and has been covered by us at length.

Using the involvement of Hans-Joerg Rudloff, a Barclays banker with close ties to Russia, the country was seeking to take a 1.5% stake in the bank. The approach came to light as the bank was trying to close a deal with investors from Abu Dhabi and Qatar in order to avoid a government bailout. Barclays was said to have been “vary wary” about the investment proposal, according to the committee meeting minutes. 

Rudloff was, at the time, chairmain of Barclays Capital, the bank’s investment banking arm. He also served on the Board of Directors of Russian oil conglomerate Rosneft for seven years prior to being re-elected in June 2018. 

The meeting minutes revealed that Barclays had instead proposed paying 120 million pounds in fees to help underwrite financing from Qatar, who is said to have laughed at the suggestion, before demanding 600 million pounds instead. 

The trial of banking executives pertaining to fraud that occurred during the crisis began in early January in a London courthouse. And while it has nothing to do with sales of the toxic mortgage backed securities and subprime loans that nearly brought down the financial system and forced millions of consumers out of their homes, it might be the closest thing to closure that the UK’s Serious Fraud Office can offer.

As we reported in late 2018, four Barclays executives, including former CEO John Varley, are on trial for fraud related to two emergency capital raises undertaken in 2008. To try and stave off nationalization (which would have devastated shareholders and, more importantly, placed the executives’ bonuses at risk) the bank turned to a group of Qatari investors who pumped a total of roughly 12 billion pounds (nearly $16 billion) into the bank.

In exchange for the emergency loans, Barclays wound up paying 322 million pounds ($423 million) in “fees” – which were, in reality, “dodgy” payoffs to the Qatari sheikh who arranged the financing. To ensure that the deal went through, the executives allegedly conspired to conceal these payments from their investors, the British state and – most importantly – the press.