EBRD-EU cooperation in Russia

The EBRD in Russia Over the past 12 years the EBRD has become the largest investor in Russia, financing projects in most of the country’s regions. By the end of September 2003, the Bank had provided €5.1 billion in support of over 150 projects. To prepare the way for future investments and to assist other activities, the EBRD works closely with the European Union. A number of funding arrangements have been established to cover areas ranging from support for small business to the improvement of safety at nuclear power stations.

The European Bank for Reconstruction and Development (EBRD) is an international financial institution established in 1991 to support the transition to market economies from central Europe to central Asia. It is owned by 60 countries and two international institutions – the European Investment Bank and the European Community.

“The EBRD-EU partnership has been very effective in mobilising domestic and foreign investment in Russia.” Fabrizio Saccomanni, EBRD Vice President

Kaliningrad

St Petersburg

Magadan

Moscow Yekaterinburg Chelyabinsk Volgograd Omsk

Novosibirsk Irkutsk Vladivostok

EBRD-EU cooperation The European Union is a key partner for the EBRD. In Russia, the two institutions have cooperated in a wide number of areas, such as: preparing the ground for EBRD investments the environment nuclear safety.

Supporting EBRD investment The European Union provides grant funding – in the form of technical assistance – to assist the preparation and implementation of EBRD investments. These investments have helped to support the privatisation process and to develop small and medium-sized enterprises in the private sector. In particular, the EU has provided technical assistance to support the activities of the EBRD’s Regional Venture Funds and Russia Small Business Fund. This funding has been used to train local staff in small business banks and to provide specialist advisory services (see case study).

EBRD-EU cooperation in numbers As of September 2003

EU funding (technical assistance) EBRD investment resulting from this funding Total investment (EBRD + other investors)

EU funding by sector Regional Venture Funds €29.2 million Russia Small Business Fund €23.2 million Privatisation €9.8 million Infrastructure €8.3 million Enterprise restructuring €2.8 million

€73 million €1.37 billion €2.71 billion

Northern Dimension Environmental Partnership (NDEP) The need for environmental investments in northwest Russia is formidable. To address this, the NDEP Support Fund was established in 2001 to tackle severe environmental problems in the areas of nuclear safety, waste-water treatment and energy efficiency. The partnership consists of Russia, the European Union, international financial institutions, such as the EBRD, and other donors. The EU is contributing €50 million (see www.ndep.org).

Nuclear safety programme The EU in Russia The European Union and Russia are ever closer partners in a wider Europe. The basis for EU relations with Russia is the Partnership

The EU collaborates with the EBRD to support nuclear safety in Russia through the EBRDmanaged Nuclear Safety Account (NSA). The collaboration focuses on three areas: supporting the promotion of effective nuclear safety

and Cooperation Agreement (PCA) of 1994. The EU is the largest provider of economic and technical assistance to Russia. Since 1991

supporting the management of spent fuel, decommissioning and nuclear waste management

around €2.6 billion of technical assistance has been provided by the EU to Russia under the TACIS technical assistance programme.

contributing to EU-supported international initiatives. The total EU contribution to the NSA amounts to €20 million.

“The EU and the EBRD are working together to support Russia’s transition to a market economy and the development of a democratic society.” Richard Wright, Head of EC Delegation in Russia

Case study Financial support for the enterprise sector The EU has contributed more than €50 million to help Russian enterprises gain access to much-needed finance. This has been provided through the EBRD’s Regional Venture Funds and the Russia Small Business Fund.

Regional Venture Funds The Regional Venture Funds (RVFs) provide enterprises with early-stage equity funding. EU funds of €29.2 million have contributed to the establishment of four RVFs in Russia: the Black Earth RVF in south-eastern Russia, the Smolensk RVF, the Urals RVF and the West Siberia RVF. The main objective of the RVFs is to secure a return on the equity capital invested in eligible companies so that further projects can be financed. By the end of 2002, RVFs had invested over €240 million in 89 companies employing over 50,000 people. Over €70 million of this had been invested by the EU-supported RVFs, assisting companies employing over 20,000 people.

Russia Small Business Fund The Russia Small Business Fund (RSBF) was established by the EBRD in 1994 to provide finance to small enterprises throughout Russia. This is made available through local banks, such as Sberbank, the Small Business Credit Bank (KMB-Bank) and five smaller regional banks. The EU has contributed €23.2 million. The RSBF operates in over 125 cities. These include the main regional capitals of Russia (such as Novosibirsk, St Petersburg, Vladivostok, Yekaterinburg and the region of Kaliningrad) and a number of smaller towns near these cities. The RSBF has lent to over 115,000 micro and small enterprises in Russia, with more than €300 million disbursed to 44,360 clients in 2002 alone. The repayment record of these clients is very good. Loans in arrears of over 30 days account for less than 1 per cent of the total outstanding portfolio.

EBRD-EU technical cooperation

EU funding has helped the EBRD to prepare and implement a wide range of investment projects in Russia. EU funding has helped to: increase lending to the municipal sector improve lending to small and medium-sized enterprises promote private sector development and enterprise restructuring improve infrastructure.

Key institutions for EBRD-EU cooperation Russian Ministry of Economic Development

EU Brussels

EBRD London

EBRD Moscow Office

EC Delegation Moscow

Russian beneficiaries

Contact information For further information, including consultancy business opportunities, visit the Bank’s web site (www.ebrd.com). For more information about EU programmes in Russia, visit the EC Delegation web site (www.eur.ru). EBRD Official Co-financing Unit One Exchange Square London EC2A 2JN Tel: +44 207 338 7123 Fax: +44 207 338 6538 E-mail: [email protected]

EBRD Representative Office 36 ul. Bolshaya Molchanovka 121069 Moscow Tel: +7 501/095 787 1111 Fax: +7 501/095 787 1122

EC Delegation in Moscow Kadashevskaya nab. 14/1 109017 Moscow Tel: +7 095 721 2000 Fax: +7 095 721 2020

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