East-West crisis to overshadow EBRD meeting 25 years after Cold War

Mon May 12, 2014 10:25am EDT
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By Marc Jones and Christian Lowe

LONDON/WARSAW (Reuters) - A quarter century after the Cold War ended, the European Bank for Reconstruction and Development will cut its growth forecasts this week as a new East-West standoff over Ukraine hurts many post-communist economies.

The EBRD, created in 1991 originally to invest in the former Soviet bloc countries of eastern Europe, opens its annual meeting on Wednesday as shockwaves rock even economies far from the center of the crisis in Crimea and eastern Ukraine.

The confrontation is nowhere as serious as the Cold War, when East and West targeted each other with nuclear missiles, but the EBRD is still worried about the consequences.

"We all talk about the impact on Ukraine and eastern Europe but it is also very serious for Central Asia," EBRD head Suma Chakrabarti said before the three-day meeting in Warsaw. "Some of these countries are very fragile."

In recent years, the EBRD has expanded its reach beyond eastern Europe and ex-Soviet central Asia to include Mongolia, Turkey and the economies affected directly or indirectly by the Arab Spring such as Morocco, Egypt, Tunisia and Jordan.

But Russia remains its biggest market by far and economic problems were growing there well before Moscow annexed Crimea from Ukraine in March, drawing retaliatory sanctions from the United States and European Union.

EBRD funding in Russia slumped last year to 1.8 billion euros from 2.6 billion in 2012 due to what the development bank termed "difficult investment conditions".

Western sanctions have targeted a limited number of Russian individuals and companies, and Chakrabarti has said there has been no pressure so far from the EBRD's main shareholders - G7 governments - to reduce its investments in Russia.   Continued...

Suma Chakrabarti, President of the European Bank for Reconstruction and Development (EBRD), address an audience during the bank's 2013 Annual Meeting and Business Forum in Istanbul May 10, 2013. REUTERS/Osman Orsal