On November 30, 2022, President of the European Bank for Reconstruction and Development, Ms. Odile Renaud-Basso, delivered a presentation lecture “The EBRD’s role in a turbulent world” at the University of Tokyo within the framework of her working visit to Japan. A significant part of the speech of the EBRD’s CEO was devoted to the Bank's activities to support Ukraine in the context of the ongoing full-scale Russian aggression against our country.
The presentation was attended by Member of the UIP Supervisory Board Professor Igor Piliaiev, who is on a research trip at the invitation of the University of Tokyo. He shared with us his impressions of the meeting.
Igor Slavovich, greetings, the EBRD is a relatively new financial and investment institution, whose activities in Europe and Ukraine we have heard a lot about. Does the EBRD also work in the Asian market?
Well, it’s not so new anymore. The European Bank for Reconstruction and Development (EBRD) was established after the end of the Cold War to promote systemic market transformations of the economies in the countries of Central and Eastern Europe.
As emphasized on its official website, “The EBRD was set up in haste to meet the challenge of an extraordinary moment in Europe’s history, the collapse of communism in its East.” The Bank's headquarters in London opened in April 1991. The EBRD is committed to furthering progress towards ‘market-oriented economies and the promotion of private and entrepreneurial initiative’. Since its establishment, the Bank has implemented more than 6,000 projects. 75% in the total volume of financial transactions on the Bank's current projects goes to private sector.
Like other multilateral development banks, the EBRD has both regional and non-regional members, with more than 70 countries in Europe, North America, Africa, Asia and Australia. Among the founders of the Bank are also the European Union and the European Investment Bank. The United States is the largest shareholder.
What projects is the Bank currently implementing in Ukraine?
The Bank has already approved projects to support Ukraine during the war in the amount of about $3 billion (including a $500 million grant received from the United States) with funding until 2023. First of all, these are projects aimed at facilitating export-import operations, ensuring energy security (maintaining sustainable operation and infrastructure of the oil and gas sector, power transmission networks, especially emergency repairs of damaged civilian power infrastructure, etc.), food security, including support for the so-called “solidarity lanes” to diversify grain exports from Ukraine, etc.
We know that at the meeting the EBRD President was asked a lot of questions. What directions are they ready to support now and in which areas?
As Ms. Renaud-Basso pointed out, the Bank continues to adhere to three priorities in its project policy:
- Green transition aimed at combating global warming within the framework of the Paris climate agreement, involving a consistent reduction in the use of hydrocarbon energy carriers,
- Inclusiveness, which involves the use by the Bank of such social, gender, regional, etc. criteria that would help ensure that most of the population can benefit from economic progress in countries where the Bank invests,
- Accelerating the digital transition, primarily to provide recipient countries with access to the Internet and digital services for small and medium-sized businesses.
How has the full-scale Russian invasion of Ukraine affected the work of the EBRD?
The President of the EBRD emphasized that shortly after the start of a full-scale Russian invasion of Ukraine, the Bank closed all its offices in Russia and Belarus and completely stopped its operations on their territory. Meanwhile, Russia continues to be among the shareholders of the Bank and maintains its quota among its international staff. An objective reality, as the head of the EBRD emphasized, is that a number of member states that are recipients of assistance under EBRD projects in economic terms are still heavily dependent on the Russian Federation. Despite that, the key decision-making levers at the EBRD are in the hands of Western donor countries.
In Ukraine, the EBRD is viewed not only as a likely donor of post-war reconstruction, but also as a platform for the implementation of all projects for the reconstruction and modernization of Ukraine. What does the EBRD itself think about this?
Of course, one can only welcome the Bank’s assistance to Ukraine, especially in maintaining the resilience of critical infrastructure, which has recently become the main target of massive Russian missile strikes. However, the Bank’s mandate, issued to it by the European and global community of democratic states with developed market economies, which is reflected both in the charter and in the very name of the Bank, is primarily to promote systemic socio-economic reconstruction, and not just fragmented projects or palliative care in crisis situations, despite the importance and relevance of the latter.
However, as follows from the EBRD President’ speech and her answers to the questions of those present, the Bank has not yet developed a strategy, format, parameters and mechanisms for providing financial and technical assistance for the post-war reconstruction of the economy and social sphere of Ukraine to ensure their further sustainable development, focusing mainly on current short-term challenges.
Perhaps in conjunction with Asian financial institutions?
Yes, it would be useful if the Bank would involve, on the principles of co-financing (as is traditionally practiced in the activities of multilateral development banks) in projects of financial and technical assistance to Ukraine, Asian financial institutions, such as the Asian Development Bank, national development banks of such economically and financially powerful countries as Japan, South Korea, Singapore, etc. Especially since, for example, Japan has the 8% share in the EBRD’s authorized capital and actively participates in its projects as a donor (its total participation in co-financing of EBRD projects by October this year reached $11 billion). Meanwhile, such co-financing from the EBRD and Asian development banks is currently being successfully implemented in the Central Asian region.
Apparently, it is worth seriously discussing the expediency of maintaining the mandatory requirement of the 50% share of green transition in EBRD projects regarding the investment and technical assistance to Ukraine in view of the critical need to restore the full operation of the national energy system, including both the oil & gas sector and thermal power plants.
The President of the EBRD stressed several times that the projects the EBRD is currently implementing in Ukraine are “very risky”, therefore, the condition for their implementation by the EBRD, despite the solidity of the Bank’s own assets (estimated at about 70 billion), is at least 50% project financing coverage either from co-financing, or state guarantees. And here, too, of course, this is a serious subject for negotiations at a high political level. After all, European and global security is at stake, and therefore a purely commercial interest cannot prevail in the activities of a multilateral interstate bank in relation to the systematic overcoming of the consequences of a war in one of the geostrategically pivot states of Europe.
30.11.2022
The UIP Press Service
