Russia crisis: Blow to Putin as China-backed bank withdraws Russian support | City & Business | Finance
With sanctions freezing much of Russia’s foreign reserves and the country largely cut off from international finance China has been viewed as a potential lifeline to Putin.
However in a further indication of Russia’s growing pariah status the Asian Infrastructure Investment Bank (AIIB) has announced it will halt all activity with both Russia and Belarus.
In a statement the bank said: “As the war in Ukraine unfolds, the Asian Infrastructure Investment Bank (AIIB) extends its thoughts and sympathy to everyone affected.
“Our hearts go out to all who are suffering.”
It added: “Under these circumstances, and in the best interests of the Bank, Management has decided that all activities relating to Russia and Belarus are on hold and under review.”
The AIIB was launched in Beijing in 2016 and describes its mission as financing “the infrastructure of tomorrow”, although it has widely been seen as a counter to the dominance of the International Monetary Fund and World Bank.
It currently has 105 approved members with China remaining as the largest shareholder, controlling 26.5 percent of voting rights.
Russia is its third largest shareholder, after India, and holds a seat on the board of directors.
Despite the halt on lending to Russia and Belarus, the AIIB said it “stands ready to extend financing flexibly and quickly and support members who have been adversely impacted by the war, directly or indirectly.
“Economic spillover from commodity price shocks, financial market volatility and other factors may adversely impact our members’ economic situation.
“We will work closely with our partner multilateral organisations to provide any needed support expeditiously.”
According to the bank’s website it has so far financed two projects in Russia, worth a combined £600.72 million ($800m), with a third worth £225.27 million ($300m) now on hold.
Two projects in Belarus worth a total of £166.14 million (€2006.67m) are also now on hold.
While China has been widely seen as a potential Russian ally over sanctions, in practice the country seems to be exercising caution in line with its ‘pro-Russian neutrality’ stance.
When sanctions first hit two of China’s largest banks moved to restrict financing for Russian commodity purchases
An executive at one Chinese-led development bank, said: “The sanctions don’t apply directly to us and we can loan to Russian entities – but is it wise?
“Do we approve that loan to that one entity?
“It’s not the best thing to do at the moment, is it?”
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China is thought to be concerned about falling foul of sanctions itself and damaging its own financial links to the west if it is seen to be helping Russia get round the restrictions.
Although it has stopped short of condemning Russia, the Chinese foreign ministry called on “all sides to exercise restraint” on Friday after Russian forces began an attack on the Zaporizhzhia nuclear power plant in Ukraine.
A spokesman said Beijing was “very concerned” about the situation.
