Russia explores support for Wildberries after Ukrainian drone attacks, sources say

By Gleb Bryanski

MOSCOW, July 28 (Reuters) - The Russian government is exploring ways to support Wildberries, the country's biggest online retailer, and related businesses after Ukrainian drone attacks, with state-controlled bank VTB expected to play a central role, two sources said on Tuesday.

The Kremlin acknowledged that discussions had taken place within the government about possible support, but said no decision had been made.

Wildberries and its rival Ozon are central to the government's plans to spur economic growth as Moscow faces mounting budget pressures from increased military spending and a broader economic slowdown.

Drones damaged at least seven Wildberries warehouses, destroying around 10% of the company's storage capacity, disrupting operations and inflicting losses on tens of thousands of small businesses that sell goods and services on the platform.

Wildberries said it would need at least 30 days to assess the damage before it could begin making payments to sellers whose goods were stored in the affected warehouses. The company also announced discounts on storage fees to support businesses.

A senior industry source told Reuters that Wildberries was in a difficult situation and might have to seek government support, most likely through state-controlled banks, in order to maintain operations.

A source close to the company with knowledge of the ongoing discussions told Reuters that Wildberries founder and CEO Tatyana Kim, Russia's richest woman, was in contact with authorities about possible steps to help business owners, including tax breaks, which could ease pressure on the company to pay compensation.

Sources said the support could come in the form of loans from state-owned banks to the company or its sellers, as well as tax breaks or subsidies.

HIGHEST PRAISE FROM KREMLIN

Kremlin spokesman Dmitry Peskov said that Wildberries had acted in an unprecedented way by announcing its decision to provide assistance to sellers whose goods were stored in damaged warehouses, despite having no legal obligation to do so.

"This, of course, deserves the highest praise," Peskov said. Wildberries declined to comment on talks with the government.

Marina Gorshkova, a Wildberries seller with an Instagram audience of 1.3 million people, recorded a video appeal to "the country's leadership," saying that there were 1 million registered users on Wildberries who needed help.

"If we close down, the treasury will stop receiving our taxes, and new entrepreneurs will not spring up like mushrooms. We are pleading with you: pay attention to us," she said, stressing that tax breaks were more important than compensation.

Inna Marchenko, from St. Petersburg, who sells pet food on Wildberries, told Reuters that she had lost 1.5 million roubles' ($19,000) worth of goods in the fires but had received only 8,000 roubles in compensation, which she could use only for advertising.

"When I learned that all my goods had burned down, I just sat on the floor and started crying. I don't know what to do next," she said.

The government has been selective in recent years in providing support to vulnerable industries. It supported coal producers but denied assistance to some construction companies.

LENDING SUPPORT

In June, just over a month before the attack, Wildberries announced a partnership with Russia's second-largest bank, VTB, which acquired a 5% stake in WB Bank, Wildberries' financial arm, with an option to increase its holding.

VTB shares fell 2.5% on Tuesday, with analysts saying uncertainty surrounding its partnership with Wildberries weighed on the bank's share price.

"There were questions about the possibility of VTB supporting our partner, Wildberries, in the wake of these negative events. If we receive such a request, we will, of course, be open to various forms of lending support," said Dmitry Pyanov, VTB's first deputy CEO.

Ukraine initially said it was targeting Wildberries because of its role in supplying the Russian army. An executive at Ukraine's leading arms producer said the retailer was also targeted because of its partnership with VTB.

Denys Shtilierman, Fire Point's co-founder and chief designer, in an interview aired on July 27 described Wildberries as the largest borrower in Russia and said its demise would lead to the collapse of a large number of banks, including VTB.

Wildberries reported debt of 830 billion roubles ($10.58 billion) under Russian accounting standards, well below that of some of Russia's largest corporations in the energy and industrial sectors.

It said debt calculated under international standards was at a comfortable level of two times the company's EBITDA — earnings before interest, taxes, depreciation and amortization — but did not disclose the numbers.

(Writing by Gleb BryanskiEditing by Ros Russell)