EBRD Stops Investments in Russia

Written by | Thursday, July 24th, 2014

The European Bank for Reconstruction and Development (EBRD) has stopped its investments in Russia as part of the West’s sanctions in the aftermath of the tragic plane crash in Ukraine’s conflict area. The London-based bank announced yesterday (July 23) that it would freeze funding of new investment projects in Russia as part of the new wave of sanctions announced last week. EBRD explained that its decision was meant to be line with the West’s coordinated action against Moscow. The bank’s board of directors, including all EU members and a number of non-EU shareholders, “have given clear guidance to the EBRD management that, for the time being, they will be unable to approve new investment projects in the Russian Federation”.

The European leadership said that both the EBRD and the European Investment Bank based in Luxembourg would cease financing their projects in Russia. Interestingly, the EBRD, founded a quarter of decade ago, helped post-Soviet bloc countries finance their transition to the market economy and democracy. The bank promised that the existing Russian projects would remain operational and the bank would also keep its “physical presence” in the country.

During the first half of this year, 19 percent of the bank’s total investments were in Russia while the remaining 81 percent were distributed across the EBRD’s 34 other countries where it is present. Russia’s 19 percent include 790 projects with net EBRD investments of 24 billion euros and gross disbursements of 17.7 billion euros. 84 percent of the bank’s portfolio is in private sector. One of the key features of the EBRD’s engagement in Russia is the support for political awakening of the middle class, particularly in major cities like Moscow and St. Petersburg. Other targets of the bank in the country include diversifying the economy, investing in and setting standards for modernisation and innovation, supporting privatisation and private sector development, and increasing economic opportunities in Russian regions.

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