Inside India newsletter: U.S., Russia vie for a bigger slice of the world’s third-largest energy market

In a recent financial misconduct scandal, four senior executives at Gazprombank's Luxembourg branch allegedly earned over €9 million by exploiting market chaos caused by sanctions against Russia. The Financial Times reported that these executives, including Dmitry Derkach, Sergey Nekrasov, Sergey Belousov, and Pavel Bolshakov, made a profit by capitalizing on the turmoil following Russia's invasion of Ukraine in 2022.

The sanctions had cut off many Russian investors from payments on Eurobonds, leading Putin to allow Russian companies to issue substitute bonds in foreign currency. The executives took out personal loans from Gazprombank, bought up Gazprom bonds at discounted prices on the European market, and then swapped them for ruble-denominated bonds at full face value in Russia.

They carried out more than 50 such transactions, potentially earning more than €9 million in profit. The executives coordinated their trades, buying identical quantities of the same bonds on the same day, often before the company announced the substitution. Gazprom stated that the bond exchanges involved the sanctioned National Settlement Depository.

Western financial market participants viewed the bond substitution mechanism with great suspicion, seeing it as a potential abuse of the situation. Gazprombank's Luxembourg branch denied any violation of EU sanctions and claimed strict compliance with laws and regulations. Derkach also denied any wrongdoing, stating that there were no material findings by the Luxembourg banking regulator following a detailed inquiry. All four executives have since left Gazprombank.