Russia is considering the possibility of raising loans from the Asian Infrastructure Investment Bank (AIIB) for financing infrastructure projects via the mechanism of sovereign loans, Deputy Finance Minister Sergei Storchak said.

He added that the move would make it unnecessary to provide sovereign loan guarantees that the bank insisted on. Loans may be raised under such a mechanism as early as in 2019.

“Sovereign guarantee in a complicated financial instrument by nature. The situation becomes even more sensitive if guarantees are provided for the benefit of a foreign creditor and is regulated in accordance with foreign legal norms.

In view of this, we tend to gain the experience of cooperation with AIIB through raising a sovereign loan. Russia will act as the main borrower,” he explained.

After that, the government either becomes creditor regarding the region, in which the project is being implemented, or acts both as a borrower and user of proceeds of the loan.

If Russia acts as a borrower, those loans will be part of the program of state external borrowings.

According to Storchak, the Finance Ministry is considering the possibility of raising funds from the bank as early as this year through amendments to the law on federal budget as introduction of amendments to the borrowings program is an obligatory precondition for borrowing funds from AIIB.

Earlier Storchak said that Russia expected AIIB to provide information about the type and terms on state guarantees required for the bank to finance Russian projects.

He noted that the bank’s management was preparing the required administrative and legal basis for entering the Russian market, but insisted on Russia providing sovereign guarantees.