Sanctions on Russia's banks have thrown into question Qatari interest in a bond issue by the Saint Petersburg-based lender VTB Group, the Financial Times reported.
"They had shown an interest before, but now we have no idea," one source told the London newspaper.
Qatar Holdings owns a 2.9 per cent stake in VTB, which is Russia's second-largest bank by market capitalisation.
A consortium of Western banks including Barclays and ING are also debating whether to proceed with a US$1.5 billion loan to VTB, according to Bloomberg News.
VTB was publicly dismissive of the effect of sanctions on their business.
The company described the measures as "politically motivated, unfair, legally dubious and economically damaging for all parties."
"[VTB] has a very strong borrowing record and expertise in various geographies in addition to western markets. We are confident in our ability to raise new funding when necessary."
The Russian government owns 60.9 per cent of VTB group.
Arabian Gulf countries, including the UAE, have sought to increase investment in Russia in recent years. Abu Dhabi's Department of Finance said in September that it was set to invest up to $5bn in Russian infrastructure projects.
In June last year, Mubadala Development formed a joint venture with the Russian Direct Investment Fund, in which each company agreed to invest $1bn in Russian infrastructure.
The total value of UAE investment in Russia has not been finalised, with an unspecified number of infrastructure projects set to be planned over the next five to seven years.
New sanctions were implemented on Tuesday in response to the shooting down of Malaysian Airlines flight MH17 over eastern Ukraine.
The restrictions, agreed by the EU member states and the US, prevent a number of state-owned Russian banks from issuing bonds or trading stocks on European markets, and prevent US citizens from dealing in debt with a maturity of greater than 90 days or in new equity.
VTB's share price has fallen 0.6 per cent over the past week, after falling 5.6 per cent the week before. The company's share price has fallen 25.3 per cent this year.
The "scenario is not entirely bleak" for VTB Group because "not all funding channels have been blocked for Russian banks, [and] Russian banks [are] less dependent on foreign funding", said Olga Naydenova, an analyst at BCS Financial Group, a brokerage
Visa and MasterCard both stated that they would continue business with VTB, while sanctions do not affect VTB's European subsidiaries. The bank has subsidiaries in Austria, Cyprus and Ireland and retail branches in France and Germany.
VTB also operates an office in the Dubai International Financial Centre.
abouyamourn@thenational.ae
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