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As Crisis Deepens, EBRD Freezes New Investment in Russia

Published: July 24, 2014 (Issue # 1821)



  • The EBRD's decision shows that the doors have only shut tighter since the downing of Malaysia Airlines Flight MH17 last week.
    Photo: Andy Lane / EBRD

The European Bank of Reconstruction and Development, or EBRD, on Wednesday froze financing of new projects in Russia amid escalating international condemnation of Russia's alleged role in the downing of a passenger jet in eastern Ukraine.

"A majority of the board of directors of the EBRD, including all European Union member states and several 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 organization said in a statement Wednesday.

The London-based development bank will continue work on its 305 active projects in Russia, where its operating portfolio amounts to 8.4 billion euros ($11 billion).

While the loss of new EBRD investments is far from trivial — about 19 percent of its investments, or nearly $1 billion, went to Russia in the first half of this year — the decision suggests that worse may be on the horizon, analysts said.

"It is a harbinger of what is going to happen, which is the increasing capital isolation of Russia," said Fredrik Erixon, director of the European Center for International Political Economy.

International lenders have shut their doors on Russian banks and companies in recent months for fear of further sanctions from the West over Russia's policy in Ukraine, leaving Russian banks unable to access additional financing and meet the needs of the national economy.

"Given the high capital need and the high investment need in the Russian economy, [capital isolation] is going to have a very, very strong effect on national GDP," Erixon said.

The EBRD's decision shows that the doors have only shut tighter since the downing of Malaysia Airlines Flight MH17 last week, which the U.S. and others have blamed on Russia's alleged funneling of weapons to the pro-Russia separatist rebels in Ukraine's east.

The deaths of the 298 people on board, many of them EU citizens, has put the EU under pressure from the U.S. and member states such as Britain to ratchet up sanctions to so-called "stage three" sector-wide measures.

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ALL ABOUT TOWN

Thursday, Oct. 2


The celebration of the bicentennial of the birth of Mikhail Lermontov continues with today’s free exhibition in the city’s Lermontov Library at 19 Liteiny Prospekt. Titled “Under the Rustling Wings,” the temporary exhibition will feature the costumes and scenery used in the 1917 production of Lermontov’s play “The Masquerade,” which he wrote in 1835 when he was only 21 years old.



Friday, Oct. 3


Learn more about how to manage and evaluate employee performance during SPIBA’s Human Resources Committee meeting this morning on “Employee Assessment: Global and Local Trends.” Starting at 9:30 a.m., the discussion will touch on such topics as the partnership between HR and business, reliable assessment strategies and more, with Tatiana Andrianova, the head of the SHL Russia and CIS branch in St. Petersburg, as the featured guest. Confirm your participation by Oct. 2 by emailing office@spiba.ru or calling 325 9091.


AmCham’s Procurement Committee Meeting is at 9 a.m. this morning in their office in the New St. Isaac Office Center on Ulitsa Yakubovicha.



Saturday, Oct. 4


Wine and cheese lovers will get their chance to revel during Scandinavia Country Club and Spa’s Wine Market Weekend. Going on today and tomorrow, wining diners can listen to live music, take part in culinary classes and, of course, sample a variety of fine wines from around the world. The cost of admission is 400 rubles ($10.30) for adults and 200 rubles ($5.15) for children.



Sunday, Oct. 5


Look for the latest fall fashions at the Autumn Market today in Freedom Anticafe at 7 Kazanskaya Ulitsa. The minimarket plans to offer clothes more flattering than the puffy jackets that are a staple of the city’s cold-weather fashion, while offering the same amount of protection from the biting winds blowing off of the Baltic.



Monday, Oct. 6


SKA St. Petersburg, the city’s KHL affiliate, welcomes Slovakian club HC Slovan in a match-up tonight at the Ice Palace near the Prospekt Bolshevikov metro station. The puck drops at 7:30 p.m. and tickets can be purchased on the club’s website or in person at either the arena’s box office or the club’s merchandise store on Nevsky Prospekt.



Tuesday, Oct. 7


Learn more about Russia’s energy industry at the St. Petersburg Energy Forum that begins today and runs through Oct. 10. Attracting industry experts and political and business representatives, the forum plans to welcome more than 350 plus companies and their representatives to discuss the future of Russia’s largest economic sector.



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