The European Bank for Reconstruction and Development (EBRD) has announced that it will not make new investments in Russia following sanctions imposed by the European Union (EU) last week.
The EBRD has been investing around $1 billion a year in Russian infrastructure projects in recent years and is one of the largest investors in infrastructure in Eastern Europe, where sources of long-term financing are scarce.
The sanctions announced last week were designed to punish Russia for its support of armed insurgents in eastern Ukraine and targeted banks and energy companies, including Rosneft, Russia’s largest oil firm. The sanctions also included a call to the European Investment Bank (EIB) and EBRD to halt new loans to the country.
The EIB, which is an EU institution, swiftly agreed to the request. However, the EBRD needed to consult with its shareholders, some of which are from outside the EU and include Russia itself.
In a statement today, the EBRD said a majority of its board of directors “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”.
In the same statement, the bank said it would continue to manage its existing projects and relationships in the country and would maintain a presence there. It added that, in the first six months of this year, when the bank invested €3.6 billion altogether, 19 percent of the total was invested in Russia.
In a previous statement towards the end of last year, which hailed the EBRD’s involvement in the St. Petersburg clean river project, the organisation noted that it had invested more than €450 million in 22 water projects in Russia since 1997. It added that it had backed more than 40 municipal infrastructure projects in more than 20 Russian regions overall.
The EBRD was founded in 1991 to support the development of markets in Central and Eastern Europe in the post-Cold War era.