Page 24 - bne_Magazine_June_2017

24 I Special report bne June 2017
The President of the European Bank for Reconstruction and Development (EBRD), Suma Chakrabarti. (AP Photo/Petros Karadjias)
Russia loses showdown at EBRD AM
..Ben Aris in Nicosia
There was some real drama at
this year’s European Bank for Reconstruction and Development annual meeting in Cyprus, largely a glorified investment roadshow for most of the countries in its patch: the board of governors “overwhelmingly” voted to reject a bid by a high-level Russian delegation to restart the development bank’s lending there.
In rival back-to-back press conferences on May 10, the EBRD president Suma Chakrabarti announced that the vote on Russia was “final”.
“The board of governors overwhelm- ingly agreed that the bank has complied with its own internal rules with respect to its engagement with the Russian Federation. That is a final and binding resolution,” Chakrabarti said at the press conference.
It was followed half an hour later by a press conference held by Russian
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Economics Minister and EBRD governor Maxim Oreshkin, who read out a long list of complaints and claimed that without Russia the bank’s profitability would plunge.
In the first part of his speech Oreshkin quoted the bank’s own charter that states: “No member country can be sus- pended or otherwise restricted on any grounds or in any manner not set forth in the agreement establishing the bank.” Oreshkin went on to say that this cre- ates a dangerous precedent where any international financial institution (IFI) could curtail member rights based on the statutory documents. “We see that the EBRD has become a tool of foreign policy and is not a development institu- tion,” Oreshkin said.
Oreshkin’s presser ended in mild threats that Russia would not par- ticipate in the EBRD’s recapitalisa- tion “when it inevitably becomes necessary”, and said Russia would
complain to the international rat- ings agencies, as “the EBRD no lon- ger deserves its ‘AAA’ rating”.
The showdown is the culmination of a fight started in 2014 when the leading members of the EU told their directors on the EBRD board that they should refuse to approve any new investment projects in Russia, after Moscow annexed the Ukrainian territory of Crimea and began supporting pro-Russian separat- ists in the eastern region of Donbas with arms and personnel.
The ban on new investment in Rus-
sia is not the same as sanctions – as
the EBRD is an IFI it is exempt from sanctions – but it has still left the bank’s €3.77bn Russian portfolio in limbo. Existing investments can continue to be serviced but no new projects started.
Russia has already twice requested that the EBRD resume lending, but only to the board of directors that actually run