LONDON (Reuters) - The head of the European Bank for Reconstruction and Development said on Tuesday he expected the bank’s shareholders to reject a renewed bid by Moscow to end a ban on fresh EBRD investments in Russia.
The EBRD agreed the freeze on new investments in 2014 over Russia’s involvement in the Ukraine crisis. Moscow wants a discussion of the freeze, which it says breaches the bank’s internal rules, at an annual EBRD meeting in Cyprus next week.
EBRD directors rejected a similar push by Russia last year but raising the issue at the annual meeting means it will be discussed by national finance ministers and central bank heads who act as the bank’s ‘governors’.
“This situation was discussed last year by our board and there was no change then to the guidance (not to invest in Russia),” EBRD head Suma Chakrabarti told reporters.
“Let’s see how it goes in Nicosia. I‘m not expecting it to be very different.”
The investment ban followed Western sanctions imposed on Russia following its annexation of Ukraine’s Crimea peninsula.
Russia used to be the EBRD’s biggest market, but the near three-year halt in investments there has seen it shrink to around 10 percent - or 3.7 billion euros - of the bank’s overall portfolio.
Turkey has replaced Russia as the biggest beneficiary of EBRD investment. The bank has spent more than 7 billion euros ($7.63 billion) in Turkey, including almost 2 billion euros in 2016 alone.
But political jitters are also rising in Turkey following a failed military coup last July and President Tayyip Erdogan’s crackdown on suspected supporters of the coup that has led to large-scale sackings and arrests.
“What is happening in a political context has affected foreign investor sentiment and some domestic investor sentiment, so the pipeline (for EBRD investments) is not as strong as it was last year, that is for sure,” Chakrabarti said.
“It is an interesting picture of change in Turkey,” he added pointing to ongoing energy and financial market reforms. “But I think it is a wait-and-see (approach) among many foreign investors to see how this political situation plays out.”
Reporting by Marc Jones; Editing by Gareth Jones