The next U.S. administration may make an effort to ease tensions with Moscow but Western sanctions are unlikely to be lifted any time soon, according to Andrei Kostin, the CEO of Russia's second-largest bank, VTB.

Kostin, one of Russia's most influential bankers and a former diplomat who served in Australia and Britain, said he believed U.S. President-elect Donald Trump would make a genuine effort to end the conflict in Ukraine, which will be close to entering its fourth year when he takes office for a second time in January.

"Considering the statements Trump made during his election campaign, I believe that he will certainly try to make efforts to resolve the Ukrainian war. But will an agreement be reached?" Kostin told Reuters from his office in one of the Moscow City business quarter's towers, stressing that any peace settlement should be for the long term.

Trump has pledged to end the conflict in Ukraine quickly, in part because he does not want the United States to pay to defend the country.

However, Kostin, who was placed under U.S. sanctions himself during Trump's first term as president, said he did not believe sanctions against Moscow would be lifted quickly as there was a powerful anti-Russian "vector" in the U.S. establishment.

"A good example is the Jackson-Vanik amendment. It was enacted against the USSR, and it was only repealed in 2012," Kostin said, referring to a Cold War-era law linking trade relations with the Soviet Union to the rights of religious minorities to emigrate.

A powerful insider who regularly meets with President Vladimir Putin, Kostin said that his own views on the conflict in Ukraine have changed since February 2022 and he now believed that Moscow "did not have much of a choice."

Anywhere but U.S. Treasuries

Kostin, whose bank once had a substantial presence in Ukraine, said he believed that Russia's reserves that were frozen in the West after the start of the conflict would not be returned.

Western countries blocked around $300 billion worth of sovereign Russian assets, with the G-7 group and the European Union agreeing earlier this year to use the interest they generated to aid Ukraine's defense. Russia has vowed legal action.

"In the West, they say, let's pay for the reconstruction of Ukraine from the reserves. And they will draw up such a bill that even the reserves will not be enough," Kostin predicted.

"Russia will never again keep its money in U.S. Treasuries. I'm sure of it. Anywhere, but not there."

Speaking ahead of the start of VTB's annual investment forum this week, where most participants will come from China, the Middle East and India, Kostin said the "dozens" of countries willing to work with Moscow showed that Western sanctions were not working, also pointing to the BRICS group summit which was held in Russia in October.

Sanctions-hit economy to slow in 2025

Russia's sanctions-hit, militarized economy is expected to slow next year and banks' profits will fall, while the benchmark interest rate may climb to 23% by the end of this year, Kostin said.

Kostin predicted that GDP growth will slow to 1.9% in 2025, above the International Monetary Fund's (IMF) forecast of 1.3%. The government expects the economy will grow by 3.9% this year. He said inflation will slow to 6.4% from the current 8.5%.

"The war has been going on for almost three years, and a huge number of sanctions have been imposed. We are living in an absolutely unusual situation," Kostin said. One-third of the state budget was going to the military, he added.

"It is impossible for the economy to go through such events without consequences. But the country has been living for three years, there is economic growth, and overall a healthy economy," he said.

Kostin cautiously criticized the central bank's hawkish monetary stance, saying the current inflation rate did not require a benchmark interest rate "three times this level."

Kostin likened Russia's central bank governor, Elvira Nabiullina, to British 20th-century Prime Minister Margaret Thatcher, who was dubbed the "Iron Lady."

"I am, of course, not as much of a monetarist and believe that an inflation rate of 8.5% is not so critical for Russia, it could be tolerated," he said.

Key rate not fully effective

Kostin said that Western sanctions, high spending on the military, state subsidies on many loans and elevated high inflationary expectations made the benchmark interest rate, which is at the highest level since 2003, less effective.

"In the context of high military expenditures and sanctions, an instrument like the key interest rate may not be fully effective in managing inflation," Kostin said.

He said the Russian rouble would stabilize at around 100 to the dollar after a period of volatility. The rouble lost 15% against the U.S. dollar after the latest round of U.S. sanctions last month hit the third-largest lender, Gazprombank, which handled Russia's energy trade with Europe.

Kostin said that with current interest rates, overall lending growth will slow to 10% next year from 20% in 2024, while Russian banks will not be able to earn as much next year as they did in 2024. He said that VTB's profit will fall by 27% in 2025.

VTB, which runs many industrial assets, including a shipbuilding conglomerate, does not foresee any mass bankruptcies due to interest rates, even in vulnerable sectors such as coal mining and real estate.

"We do not see the situation of 2008, when major companies collapsed. I do not see any companies that are currently feeling completely bad," Kostin said.