Jason Corcoran in Moscow -

Russian President Vladimir Putin is abandoning his much-vaunted pivot to Asian sources of finance, judging by the prominence given to Anglo-American investors during his question & answer session at the VTB Capital conference in Moscow on October 13.

A year ago, Western investors were largely absent or mute as the Moscow forum was flooded with representatives from China and Asia peppering Putin and his government representatives with staged questions about co-investment projects.

Putin had hoped that Chinese banks would replace Wall Street as the country's key source of funding after financial sanctions were slapped on Russia for annexing Crimea and fomenting war in eastern Ukraine.

Turn the clocks forward to today and it transpires that Chinese banks have a negligible appetite for bailing out the Russian economy. At the q&a session, the planted questions for Putin came mostly from US, British and Scandinavian investors.

Indeed, hardened Russia watchers were in shock that VTB could lure representatives from conserative retirement funds in California and Delaware to Moscow, never mind get them to lob softball questions at Putin. Just two questions were posed by delegates from the BRICS rainbow of emerging markets, one from India and one from South Africa. Other questions came from Invesco Advisors, East Capital and Lloyds of London, 

"Funding from China can't and isn't replacing what the West provided," said a Moscow-based hedge fund manager at the forum. "The Chinese are not interested and don't trust Russia so the Kremlin has decided in desperation to lure the Yanks and the Brits back into the game."

The heads of sanctioned state-controlled lenders VTB, Sberbank, and Gazprombank all went cap in hand on roadshows to Asia over the past year looking for financing. However, they found that Asian bankers were unwilling or unable to invest, partly out of fear of incurring the wrath of US regulators.

The banks have to rely on expensive short-term funding from the Central Bank and their deposit funding base but it's not sustainable over the long-term.

A new agreement brokered in Paris on October 2 to hold elections in eastern Ukraine, along with a ceasefire and a continuing withdrawal of weapons from the front lines, is boosting hopes Russian companies will be allowed out of the funding purgatory.

Blue-chips companies Norilsk Nickel and Gazprom both managed to sell the first Eurobonds by any Russian issuer in 11 months in October. Neither are sanctioned, but it's a good omen that the investor base, made up of mainly US and European funds, is now willing to take up Russia risk.

A VTB banker at the event said the lender is working closely with other Russian exporters who are waiting for bond yields to fall and that there could be three or four more Eurobond issues to come in the next few months.
Alexei Yakovitsky, global chief executive and chairman of VTB Capital, told CNBC the country's banking sector has struggled to access external source and is hoping for a swift end to sanctions.

"I think that whenever the lifting of sanctions happens it's going to be a major positive shock, a major positive outcome for the market and you'll see a significant improve across all fronts and obviously VTB Capital will be a big beneficiary of this," Yakovitsky said on the fringes of the forum.

A swift end to sanctions, especially the US prohibitions, is probably wishful thinking but Russian banks may see a loosening in their interpretation and a willingness of traditional Russia investors to dip their toes back in the water.
Russia's sovereign dollar bondshave returned 17% this year as a fragile ceasefire holds in Ukraine and as oil rebounded 26% from a six-year low. Russian stocks have also joined the party with the Market Vectors Russia ETF yielding 15% this year, the best performance among 776 U.S.-domiciled tracker funds.