Bank of New York Mellon (BNY) will begin lending to Russian state banks again after Moscow abandoned a $22.5 billion lawsuit against it.

The American bank said yesterday that it would provide an initial $400 million to unnamed Russian state banks in a renewable loan facility that would total $4 billion over five years.

The announcement was made outside a Moscow court where a judge had just approved a request by Russia’s Federal Customs Service to drop its two-year legal battle against BNY. A spokesman for BNY said that the decision to begin a new lending programme had been under discussion for some time and was not connected to the lawsuit being revoked.

The spokesman said that BNY had existing relationships with several Russian state banks, which he declined to name. “BNY looks forward to building its business in Russia,” he said.

Russia sued BNY in 2007, claiming $22.5 billion in compensation for taxes the state lost from billions of dollars transferred illegally out of Russia via BNY accounts between 1996 and 1999.

The Federal Customs Service acc-used BNY, the world’s largest custodian of assets, of playing a central role in a campaign to help clients avoid Russian taxes and import duties and to hide money obtained through crime.

Lucy Edwards, a BNY vice-president and Russian émigré, was at the centre of the $7.5 billion of transfers. Ms Edwards, born Ludmila Pritzker, and her husband later pleaded guilty to a US charge of conspiracy relating to illegally moving money. The couple were sentenced to six months’ house arrest, put on probation for five years and ordered to pay a $20,000 fine and $685,000 in compensation.

BNY was never charged with any wrongdoing and reached a nonprosecution agreement with the US Government.

The Russian customs case attempted to invoke a US anti-racketeering law to claim compensation of three times the amount originally transferred out of the country.

BNY has always said that the lawsuit was without merit.

Yesterday the bank agreed to pay $14 million towards Russia’s legal costs without admitting liability.

In a joint statement, BNY and the Russian Federal Customs Service said that they were “pleased that the dispute is finally resolved”.

The agreement is another sign that US-Russian relations, which hit a low during the conflict in Georgia last year, are improving.

President Obama and Hillary Clinton, the Secretary of State, have both paid visits to Russia over recent months in an attempt to improve relations between it and the United States.

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