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May 12, 2017 www.intellinews.com I Page 2
Russians lose showdown
at EBRD AM
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 con- ference held by Russian 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 suspended 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 creates a dangerous prec- edent 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 devel- opment institution,” Oreshkin said.
Oreshkin’s presser ended in mild threats that Russia would not participate in the EBRD’s recap- italisation “when it inevitably becomes necessary”, and said Russia would complain to the interna- tional ratings agencies, as “the EBRD no longer deserves its ‘AAA’ rating”.
The showdown is the culmination of a fight start- ed 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 Ukrainain territory of Crimea and began support- ing pro-Russian separatists in the eastern region of Donbas with arms and personnel.
The ban on new investment in Russia 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. Exist-
ing 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 the bank. This was the first time Russia had appealed to the board of governors that make up the EBRD shareholders. The Kremlin made sure its appeal was high profile by sending not only Oreshkin to head the delega- tion, but also the CEO of state-owned Sberbank, German Gref, who attended the meeting to sit on a panel about promoting competitiveness.
But the cards were stacked against Oreshkin from the start. The board of governors is dominated not only by the EU, but also by members from Cana- da, the US, Japan and China that joined last year.
Oreshkin gave a long speech to the governors, according to those in attendance, which sought to make two main points: the EBRD had broken its own rules by refusing to put up new projects to the board for approval; and that without the Rus- sian business the bank’s profits will be badly hurt and this will undermine its financial stability.
The first point turns on a technicality and Oreshkin brought a legal opinion written by an emeritus pro- fessor from Sorbonne university that concluded the EBRD had broken its own rules. But he said the board of governors “evaded” the discussion in the meeting.
Chakrabarti reiterated that the board had studied the issue and voted that it had done no wrong. Un- der the EBRD’s charter all new investments must be approved by the board, which is at liberty to refuse any project.
Part of what has incensed Russia is the blanket nature of the ban, which largely affects companies in the private sector that have not been included in the international sanctions regime. In the early negotiations in 2014 the Russian side were push- ing for the private sector investments at least to continue, even if those with state participation were blackballed.