Eurasian Development Bank Taking on Sanctions-Hit Financing Projects
The Eurasian Development Bank (EDB) is continuing projects initially led by foreign banks but currently suspended due to anti-Russia sanctions, Dmitry Pankin, the chairman of the EDB Management Board, said on Friday. Speaking on the sidelines of the Eurasian Week international forum in Astana, Pankin said that the EDB may take the opportunity to take up those projects that cannot be run by foreign banks. “The anti-Russian sanctions have two sides for us. There are factors that restrict work, and there are those that open up new opportunities and should be used,” Pankin said.
The EDB is an international financial institution established by Russia and Kazakhstan in 2006 in an effort to boost the development of the market economy and expansion of trade ties between the shareholders, which are Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, and Russia. The Bank’s charter capital totals US$7 billion, including US$1.5 billion of paid-in capital and US$5.5 billion of callable capital.
To illustrate the transferring of financing projects, Pankin explained that a reconstruction project for water facilities in Russia’s northern city of Yakutsk, which had been funded by the European Bank for Reconstruction and Development (EBRD) could now no longer be funded by the bank. EBRD’s decision to suspend Russia’s new projects from July 2014 was made amid the worsening of Moscow’s relations with Washington and Brussels. Instead, the EDB will finance the next stage of the project.
Formally, the EDB is not affected by the sanctions, but some potential partners have expressed concerns over Russian financial institutions.
“Sanctions never work in the long term”, says Chris Devonshire-Ellis of Dezan Shira & Associates. “The US had sanctions on Cuba for over 50 years and has imposed severe sanctions on North Korea. They have just made matters worse, and made the local economies they are aimed at more resilient and adaptable. Russia is a US$1.8 trillion economy and can just source goods and finance with Asian nations instead of the US and EU, which is what is happening. Russia will identify the most important projects abandoned by European institutions due to sanctions and re-arrange the financing. This is actually a problem for the EU as Russia is looking, like everyone else, for dependable partners, and the sanctions have damaged EU and US credibility in this regard.”
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Chris Devonshire-Ellis is the Founding Partner and Chairman of Dezan Shira & Associates. He is based in Europe. The firm provides European businesses and governments with strategic, legal, tax and operational advisory services to SMEs and MNCs investing throughout Asia and has 28 offices across China, India and the ASEAN nations as well as St. Petersburg and Moscow. Please contact the firm at asia@dezshira.com or visit the practice at www.dezshira.com
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