The Russian government is currently evaluating options to assist Wildberries, the largest online retailer in the country, along with its associated businesses, following drone attacks from Ukraine that have damaged its infrastructure. State-controlled VTB Bank is expected to play a significant role in this support, as reported by two sources to Reuters on Tuesday.
Officials from the Kremlin have acknowledged that discussions about potential assistance have taken place but indicated that no decisions have been made yet.
Wildberries and its competitor, Ozon, are central to the government’s plans for stimulating economic growth, especially as Moscow faces increasing budgetary pressures due to rising military expenditures and a general economic slowdown.
The drone strikes have impacted at least seven Wildberries warehouses, destroying about 10% of the company’s storage capacity, disrupting operations, and causing losses for tens of thousands of small businesses that sell goods and services through the platform.
Wildberries stated it would require at least 30 days to assess the damages before it could begin compensating sellers whose goods were stored in the affected warehouses. The company also announced reductions in storage fees to support businesses during this challenging time.
An industry source informed Reuters that Wildberries is in a precarious situation and may need to seek government support, likely through state-controlled banks, to sustain its operations.
A source close to the company revealed that Tatiana Kim, the founder and CEO of Wildberries, and the wealthiest woman in Russia, has been in talks with authorities regarding possible measures to support business owners, including tax incentives that could alleviate the company’s burden of paying compensation.
Support may come in the form of loans from state banks to the company or its sellers, as well as tax incentives or subsidies.
Kremlin’s High Praise
Kremlin spokesman Dmitri Peskov noted that Wildberries has acted commendably by announcing its decision to assist sellers whose goods were in damaged warehouses, despite having no legal obligation to do so. “This certainly deserves the highest praise,” Peskov said. Wildberries declined to comment on discussions with the government.
Marina Gorshkova, a vendor on Wildberries with 1.3 million followers on Instagram, issued a video appeal to the “leadership of the country,” stating that there are 1 million registered users on Wildberries in need of assistance. “If we shut down, the treasury will not receive our taxes, and new entrepreneurs will not emerge as mushrooms after the rain. We implore you: please pay attention to us,” she emphasized, noting that tax incentives are more crucial than compensation.
Inna Marchenko from St. Petersburg, who sells pet food on Wildberries, told Reuters she lost goods worth 1.5 million rubles ($19,000) due to the attacks but received only 8,000 rubles in compensation, which can only be used for advertising. “When I found out that all my goods had burned, I just sat on the floor and started crying. I don’t know what to do next,” she said.
In recent years, the Russian government has been selective in providing support to vulnerable industries, having assisted coal producers while denying aid to construction companies.
Support Through Loans
In June, more than a month before the attacks, Wildberries announced a partnership with VTB, Russia’s second-largest bank, which acquired a 5% stake in WB Bank, Wildberries’ financial division, with an option to increase its stake.
VTB’s shares fell by 2.5% on Tuesday, as analysts noted that uncertainty surrounding the partnership with Wildberries impacted the bank’s stock price.
“There have been questions about whether VTB will support our partner, Wildberries, in light of these negative events. If we receive such a request, we will, of course, be open to various forms of support through loan provisions,” stated Dmitri Pianov, VTB’s deputy general director.
Initially, Ukraine claimed it targeted Wildberries due to its role in supplying the Russian military. An official from Ukraine’s leading arms manufacturer asserted that the retailer was targeted also because of its partnership with VTB.
Denys Shtilierman, co-founder and chief designer of Fire Point, described Wildberries in a July 27 interview as the largest borrower in Russia, asserting that the retailer’s collapse could lead to the downfall of many banks, including VTB.
Wildberries reported a debt of 830 billion rubles ($10.58 billion) according to Russian accounting standards, which is significantly lower than the debt levels of many major Russian companies in the energy and industrial sectors. The company indicated that its debt calculated under international standards was at a comfortable level, twice that of its EBITDA—earnings before interest, taxes, depreciation, and amortization—but did not disclose specific figures.
