Finances were divided among the peoples – Newspaper Kommersant No. 7 (7452) of 01/17/2023

The Council of the Eurasian Development Bank (EDB) yesterday made public the decision taken on December 30, 2022 on the redistribution of its authorized capital among the member states. Part of the block of shares owned by the Russian Federation, in the amount of 321 thousand, is evenly redistributed among the other participating states. As a result, the share of the Russian Federation in the EDB with an authorized capital of $7 billion (7 million shares of $1,000) is reduced from 66% to 44.8%, and none of the countries will have a controlling stake in it. However, whether this will save the Eurasian Development Bank from the spread of Western sanctions on it is unknown: new measures of influence on the Russian Federation in connection with its military operation in Ukraine are only being discussed.

The shares of the rest of the EAEU countries in the EDB, respectively, will increase: more significantly – in Kazakhstan, up to 37.3% (from 33%), in Armenia and Kyrgyzstan – up to 4.2%, in Belarus – up to 5.2%, in Tajikistan – up to 4.3%. The bank did not comment on what was happening yesterday, however, the redistribution of shares in the EDB has been discussed since August 2022, then the Minister of Finance of the country Yerulan Zhamaubaev announced about Kazakhstan’s intentions to increase the share in it – it was assumed that Kazakhstan’s stake would grow to the controlling one, which did not happen: there will be no control in the EDB none of the countries.

Bloomberg and Reuters sources explained the erosion of Russia’s controlling stake in the EDB in the fall of 2022 by the desire of the EAEU authorities to withdraw the bank from the possible spread of further Western sanctions on it in connection with the Russian military operation in Ukraine – we recall that the tenth package of EU sanctions is still under development and the outcome of the process is unpredictable. Indirectly, the reasons for the changes in the capital of the EDB were later confirmed by the introduction of government amendments to the Budget Code to the State Duma – according to them, in 2023, by agreement with international financial organizations (IFIs), the White House will be able to decide on the conversion of the Russian Federation’s share in these organizations into their financial obligations with the possibility of a reverse conversions on his initiative. The Russian Ministry of Finance then explained to Interfax that the Russian Federation was ready to reduce its stake in a number of MFIs in order to avoid the imposition of sanctions on them.

It was not possible to find out what the Russian Federation will receive from the transfer of shares (according to the bank’s charter paid in US dollars and the equivalent of $ 321 million), yesterday it was not possible: Kommersant’s interlocutors familiar with the topic advised to familiarize themselves with the procedure for the initial payment of the bank’s capital, fixed in its charter (he allows for partial, partially proprietary and deferred up to two years payment for such participation), which should probably be taken as a hint that in the current case, the procedure for real settlements between the founders may turn out to be more complicated than a simple “buy-out” of the Russian share. Thus, if we consider what is happening in the logic of the amendments to the BC that have not yet been adopted, the transfer of EDB shares to partners may also allow for delays, the bank’s obligations to the Russian Federation and agreements on the possibility of their repurchase.

It should be noted that the EDB is a classic interstate development bank and is designed to promote integration into the EAEU, in particular, by lending to interstate projects (as international logistics corridors, see Kommersant of October 28, 2022) and financing the catch-up development of the “small” states of the union for harmonization of the common economic space: the main share in the EDB portfolio is occupied by projects of transport infrastructure, digital systems, green energy, agriculture and industry.

The redistribution of the shares of countries in the EDB, we note, will not entail an automatic change of its head (elected for four years, now the bank is headed by the ex-head of the Russian Post and ex-deputy head of the Ministry of Economy of the Russian Federation Nikolai Podguzov): the head of the bank is elected by a simple majority of council votes , which includes two representatives from each participating country, and is dismissed by three-quarters of the votes. However, each member of the council votes with the number of shares attributable to him, so that as a result of the cross-country redistribution of shares, the “weight” of each of the members of the bank’s council in voting will change.

Oleg Sapozhkov