EBRD plans Arab expansion, Russia urges caution
Astana, May 21, 2011
The European Bank for Reconstruction and Development (EBRD) agreed on Saturday to begin the process of expanding lending into the Mena region, following a string of popular revolts in the Arab world.
The expansion has been supported by the US and Germany, but Russia urged caution asking the EBRD to tread carefully in expanding lending into North Africa and the Middle East.
'Keeping in mind the development level of civil society in many of the countries where expansion is taking place, we could be creating big problems for ourselves from the start,' remarked Russian Deputy Finance Minister Sergei Storchak.
Talking to reporters on the sidelines of the EBRD's annual meeting, held in Kazakhstan's capital Astana, Storchak said, 'As far as I know, we are not alone in this position.'
The bank will explore how to direct funds to Egypt, where President Hosni Mubarak was toppled in February, and other states in the region in the same way that it has supported former communist countries since the fall of the Iron Curtain more than two decades ago.
Created after the Cold War to help ex-Communist countries' transition to market economies, the bank lends about 9 billion euros a year to projects stretching from Croatia in central Europe to Kazakhstan's frontier with China in the East.
The Board of Governors asked the EBRD's directors to come up with proposals by July 31 to extend the US- and European Union-backed lender's mandate into the Mena region.
'We are witness to extraordinary times, and this calls for extraordinary measures,' EBRD EU Alternate Governor Vassili Lelakis said before the agreement at the bank's annual meeting in the Kazakh capital Astana.
Russia, while supporting the expansion of the EBRD, believed that the development bank should not force the process.
The bank is expected to approve a request later this summer from Egypt, an EBRD shareholder, to become a country of operation. Egypt's military council is preparing for a September election following the fall of Mubarak.
Officials have said lending to Egypt could start at around 100 million to 200 million euros next spring. An EBRD spokesman said a team would go there in the next few weeks to identify infrastructure, agriculture and other potential projects.
Morocco, also a shareholder, has expressed similar interest.
EBRD president Thomas Mirow has said lending could grow to about 2.5 billion euros for the whole region by 2015, although the Board of Governors stipulated that the expansion should not require shareholders to raise the bank's capital or undermine the bank's other operations.
'(The decision) was a very strong signal from our shareholders that they believe in the EBRD's expertise regarding transition, and the experience we have collected in central and eastern Europe, for the current developments in North Africa and the Middle East,' he said.
The EBRD now lends in 29 countries in central and Eastern Europe and the former Soviet Union. Its 63 shareholders include EU states, Russia, Japan, the United States and other countries.-Reuters