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By John Helmer, Moscow

In its 20-year history, the London-based European Bank for Reconstruction and Development (EBRD) has been notoriously slow to process borrower applications and disburse funds. Insiders say this reflects the problems of adjusting the commercial imperatives of the bank’s €53 billion project financing book, to the political realities and demands of the 63 shareholders who were on opposing sides of the Cold War until 1991.

The bank is also slow in removing Elena Kotova as the bank board director for Russia, Tajikistan, and Belarus.

This is how the EBRD website reported the position on Wednesday, one day after Kotova and three other Russian officials at the EBRD headquarters in London were reportedly stripped of their diplomatic immunity; and several days or weeks after Kotova and the others were targeted for alleged ethics violations in bank transactions (read corruption), and Kotova sacked:

Elena Kotova

Russian Federation (RussianOffice@ebrd.com)



Tajikistan (TajikistanOffice@ebrd.com)



Belarus (BelarusOffice@ebrd.com)




The bank’s January 18 statement does not name the targets: “The officials either work or have worked at the EBRD in their capacity as representatives of the Russian government, a shareholder of the EBRD and one of its Countries of Operations.” Russian press coverage began naming Kotova, and reporting that the Russian government had acted against her, on Tuesday.

Moscow press coverage of the affair has emphasized that Kotova is the first EBRD board member to lose her status and face civil or criminal charges in the UK courts, if that is how police investigations now under way in London and Moscow end up.

Three other Russian names on the EBRD staff roster have been mentioned in the Russian press. They are regular EBRD staffers, not officials of the Russian government working on secondment to the bank. They are not targets of investigation. In the case which has now come to light, the EBRD’s position is that because the targets are Russian government officials, not staff, it is up to the Russian government to identify them, or the City of London Police if formal charges are filed.

An off the record briefing by an EBRD official about the new case suggests that the transaction or transactions which first triggered the internal inquiry last July were loan or investment projects which may not have been completed. These involved Russian business. They did not extend to Tajikistan or Belarus, which also came under the supervision of Kotova in her EBRD board position.

It thus appears that the current corruption investigation and the targets are more limited than Moscow media reports have implied, and have not extended to Kotova’s involvement in loans or investments in Russia which were implemented before the current problems were spotted and an inquiry initiated last July.

Among the Russian clients of the EBRD, one of the best-known is United Company Rusal. It received the EBRD’s seal of approval in early 2006 for a loan for the Komi bauxite mining project originally prepared by Siberian Ural Aluminium (SUAL), before it sold a half-share in the project to Rusal, and then merged entirely. The EBRD claimed in its public releases and official comments that it had subjected Rusal’s controlling shareholder and chief executive Oleg Deripaska to a series of explicit covenants and signed undertakings. Deripaska, the EBRD claimed, had certified that he had had no shareholding or loan contract, no obligations, and no business relationship with Mikhail Chernoy (Michael Cherney). Subsequent evidence and rulings in Cherney’s favour in the UK High Court indicate that Deripaska was lying, and that the EBRD had made a grave mistake. But the bank has not acted to investigate. Was this favourable treatment done according to the EBRD ethics rulebook, or was it something else? Was it Kotova, on the bank board late in 2005, who provided a helping hand – and who gave her instructions from the Russian government in Moscow? How much initiative did she show in London? How many of the transactions Kotova voted for since she joined the board in 2005 are now being reviewed?

The EBRD’s response is that it has not investigated the Rusal transaction because, according to a bank spokesman, “the EBRD had no reason to investigate compliance with ethical principles in this project. Investigations are only launched when there is a sound reason for doing so.” The evidence already submitted in the ongoing High Court case Cherney has brought against Deripaska, and the court rulings issued by High Court judges casting doubt on Deripaska’s credibility, are not enough, not yet, for the EBRD’s compliance unit.

Because the Russian directorate at the EBRD also supervises Tajikistan and Belarus, Kotova was formally designated director all three countries. But the EBRD bankers responsible for Tajikistan have kept mum on evidence of presidential-level corruption in the operation of Tajikistan’s principal export industry, aluminium. That too involved corruption by Rusal, according to evidence presented in other UK High Court cases. In 2007, the head of the EBRD’s compliance unit, Enery Quinones, claimed through a spokesman that she didn’t run an anti-corruption programme at all. “The EBRD’s anti-corruption and integrity agenda,” the spokesman said in response to questions about Tajikistan, “is achieved primarily, however, via the projects that it undertakes, the due diligence that is done before any project is approved, the conditions attached to projects and the monitoring of projects during the period of the EBRD’s involvement. The EBRD also works on integrity issues via policy dialogue with the authorities in our countries of operations.”

Until now it isn’t clear what compliance issues were raised, and what EBRD investigations have found in the handling of one of the most mysterious of recent EBRD transactions with Russia. That was a $30 million investment for the Karakul cobalt mining project at Kosh-Agach, Altai region. Voting in favour on January 8, 2008, was Kotova. This is all the EBRD has reported on the transaction: “The Board approved an equity investment of up to USD 30 million (EUR 21.4 million) to Imperial Mining Holding Company. The equity investment will be used to finance preparation of a full feasibility study (including a full international-standard EIA), implement preparatory work for the development of Karakul cobalt-copper deposit in Altai region of Russia, and expected acquisition of nearby satellite deposits.” No documentation has been published of EBRD investigation of the project, its environmental impact assessment, or Russian government approval of the foreign-owned mining company in the strategic resource sector.

The EBRD now acknowledges that this empty record is a technical glitch, and that the supporting documentation and due diligence papers were prepared, and will be released. Officially, the EBRD says of the Karakul project: “while that investment is not problem-free, the EBRD has determined there was not anything improper about this project.” Regarding Kotova’s involvement, the EBRD is categorical that there is “no connexion” between the transactions targeted by the current investigation and the Karakul cobalt investment.

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