Sir Suma Chakrabarti, the president of European Bank for Reconstruction and Development, insists that Western sanctions against the Kremlin will not push the London-based lender out of Russia after unnamed EBRD officials flagged up the possibility.
"We have no intention of exiting Russia - we have a very large portfolio to manage," Chakrabarti, who is up for re-election next month, told US media in Kiev. "Since July 2014 we've not been able to progress with new projects, but we have more than 200 existing projects which we have to manage."
Chakrabarti's comment are at odds with private and public comments disclosed in a bne IntelliNews April 22 report, which revealed the EBRD will begin winding down its Russia operations if the European Union renews its sanctions against the Kremlin over its involvement in the Ukrainian conflict.
"Some senior figures at the bank want us to wind up," an EBRD insider told bne IntelliNews. "There's been some in-fighting about it because management on the ground in Moscow want to carry on. If the sanctions are renewed in June, we will have to cut down on our staff numbers in Russia."
Meanwhile, Jonathan Charles, EBRD's managing director of communications, said on April 22: "The question of whether the bank can resume investing in new projects in Russia remains a matter for our shareholders."
The EBRD is owned by 65 countries, the EU and the European Investment Bank, but the countries with the largest stakes are Germany and the UK with 9.5% each, and it's said that politicians from major European capitals exert great influence over the bank's Russia policy. The US, which is much more strongly opposed to active EBRD involvement in Russia, also carries great weight.
Even without a formal decision by shareholders to close its Russian offices, the EBRD could burn down its portfolio in five years at its current disposal rates.
The bank's Russia portfolio, its second largest after Turkey, has shrunk to €5.35bn from €6.3bn a year ago following a number of exits, most recently from TransContainer, in which the EBRD took a loss of more than $100mn. Its decision to freeze new investing prevents its managers from topping up their existing bets or making new investments or loans since July 2014.
The London-based lender was set up in 1991 by Western governments to help former communist countries make the transition to capitalism. Last year was the first full year in which the bank brought no new projects to Russia – once the single largest recipient of annual funding – after a majority of shareholders decided to halt new funding almost two years ago, following Russia's seizure and annexation of Crimea from Ukraine.
The bank has a staff of about 80-90 in Moscow, although many have been reassigned to work on Kazakhstan and other countries in Central Asia since the freeze on new Russia investments. None of the seven offices in Russia have been closed so far.
The EBRD has expanded its activities in recent years to include Mongolia, Turkey, Greece and Cyprus, as well as countries affected by the Arab Spring uprisings, such as Egypt, Morocco and Jordan. In 2014, the EBRD also suffered its first annual loss because its portfolio in Russia and Ukraine had tumbled.
One factor that will likely influence the EBRD's future in Russia is the expected re-election of Chakrabarti for another four-year term at the lender's annual meeting in London. The incumbent president is expected to triumph in a run-off against Marek Belka, the current governor of the National Bank of Poland, on May 11 at the EBRD's annual meeting in London. Chakrabarti, a British national who was born in India, is said to be more in favour of extending the EBRDs remit further east, though he has played this down in public. China joined as a member in January.