Russia Country Update (English)
Russia Country Update #1
Monday, June 09, 2008
Recent developments, decisions, and civil society activities related to activities of the International Financial Institutions (IFIs) in Russia.
The Russia Country Updates provide information about recent developments, decisions, and civil society activities related to International Financial Institution (IFI) involvement in Russia, including that of the World Bank (WB), International Finance Corporation (IFC), International Monetary Fund (IMF), and the European Bank for Reconstruction and Development (EBRD). If you would like to be included in or removed from the distribution list, please e-mail the moderator, George Holliday, at gholliday@bicusa.org. Correspondence with BIC may be conducted in Russian.
The Bank Information Center (BIC) partners with civil society in developing and transition countries to influence the World Bank and other international financial institutions (IFIs) to promote social and economic justice and ecological sustainability. BIC is an independent, non-profit, non-governmental organization that advocates for the protection of rights, participation, transparency, and public accountability in the governance and operations of the World Bank, regional development banks, and IMF. For more information about BIC, see www.bicusa.org.
Sections:
I. IFI Project Activities
II. Extractive Industry Transparency Issues
III. Civil Society Activities
IV. IFI Consultations and Policy Updates
V. Other Notable Developments
Major IFC Investments
May 29, 2008: The International Finance Corporation invested $50 million in Belgrankorm Group to increase its production of meat and agricultural products and develop best practices for corporate governance and sustainability.
Belgrankorm Expansion (IFC website)
May 21, 2008: IFC plans to award $60 million in loans to the third phase of Kronostar’s forestry production project.
Kronostar III (IFC website)
April 24, 2008: IFC approved $75 million in loans and equity for Nitol Solar’s construction of a silicon factory in Russia.
Nitar Solar (IFC website)
April 3, 2008: IFC disclosed a $35 million loan to MDM Bank to encourage lending to energy efficient projects, as well as a $350 million loan for the bank’s general operations.
MDM Bank (IFC website)
For more IFC projects in Russia, including a number of financial industry projects, see the link below:
IFC Projects in Russia (IFC website)
World Bank Activities
February 26, 2008: The World Bank approved a $200 million loan to improve market efficiency in housing and communal services throughout Russia.
Housing and Communal Services Project (WB website)
Major EBRD Activities
May 22, 2008: The European Bank for Reconstruction and Development disclosed a 20 million euro loan to Lipetsk Municipal Energy Company to finance upgrades in Lipetsk city’s municipal services.
Libetsk Municipal Infrastructure Project (EBRD website)
May 22, 2008: EBRD also announced plans to fund upgrades to the Vyborg Port by awarding up to 115 million euro in loans to the Oslo Marine Group.
Oslo Marine Group (EBRD website)
April 29, 2008: EBRD signed an $85 million equity investment in INK capital, an Irkutsk oil and gas company. The investment allows EBRD to encourage corporate governance improvements and requires the company to publish its payments to the Russian government. The project was given a C/1 environmental impact rating, which requires an Environmental Audit.
Irkutsk Oil and Gas Project (EBRD website)
April 15, 2008: EBRD made a 175 million euro equity investment through its purchase of a 4% stake in OGK-5, a Russian power company, as part of a privatization process and strategic partnership.
OGK-5 Equity (EBRD website)
April 11, 2008: EBRD proposed financing a $17.5 million loan for the Okhta Collector Tunnel, which would decrease the amount of untreated waste flowing into the Neva River.
Neva River Environmental Project (EBRD website)
For more EBRD projects, including a number of financial industry projects, see the link below:
EBRD Projects in Russia (EBRD website)
Overview
The Extractive Industries Transparency Initiative (EITI) was begun in 2002 by UK Prime Minister Tony Blair. It aims to improve openness and transparency in company payments and in government revenues from extractive industries. An independent auditor reconciles payments from companies with revenues received by the government.
EITI Progress
Unlike its neighbors, Russia has distanced itself from EITI, rather than taking steps toward its implementation. In theory, Russia signed onto EITI principles through the 2003 G-8 Summit declaration, Fighting Corruption and Improving Transparency (G-8 website). Although the document fails to name EITI, it outlines the same ideals, including publishing aggregated payment data from companies and governments. Moreover, the 2007 G-8 Heiligendamn declaration (G-8 website), Growth and Responsibility in the World Economy, explicitly supports EITI. However, despite Russia’s role in the G-8, these principles have not yet been adopted in practice.
IFI Involvement
- World Bank support of EITI includes administration of the EITI Multi-Donor Trust Fund and assistance to civil society groups and the EITI Secretariat.
- On April 12, 2008, the World Bank announced an Extractive Industries Transparency Initiative Plus Plus (EITI++) project, which offers governments additional options and technical aid for improving revenue management. Civil society groups, such as Publish What You Pay, have endorsed the project. EITI Plus Plus (WB website)
- As of January 2007, all investors supported by the International Finance Corporation must publish their payments to the government. The IFC will evaluate investor compliance in the first half of 2008. Implementation of the Management Response to the Extractive Industries Review, World Bank, February 2008 (WB website, Acrobat pdf)
- The European Bank for Reconstruction and Development (EBRD) has pledged support for EITI through active involvement in EITI consultation, promotion of transparency in revenue reporting and within the financial sector, and capacity-building aid for countries implementing EITI principles. EBRD EITI Policy (EBRD website)
- In February of 2008, the Asian Development Bank officially endorsed EITI. ADB Endorses EITI (ADB website)
Resources
Heiligendamn declaration, G-8, June 7, 2007, (G-8 website, Acrobat pdf)
Russia's Energy Policy: Between Security and Transparency, Andrey Makarychev, December 2006 (CSIS website, Acrobat pdf)
Drilling Down: The Civil Society Guide to Extractive Industry Revenues and the EITI, Revenue Watch Institute, May 2008 (RWI website)
Implementation of the Management Response to the Extractive Industries Review, World Bank, February 2008 (WB website, Acrobat pdf)
Eye on EITI: Civil Society Perspectives and Recommendations on the Extractive Industries Transparency Initiative, Publish What You Pay and Revenue Watch Institute, 2006 (EITI website, Acrobat pdf)
Environmental Group Challenges Shipping Port
On May 30, 2008, according to North Caucasus Environmental Watch (Экологическая Вахта Севрного Кавказа), residents of Primorsko-Akhtarsk challenged the construction of a marine shipment port south of the city on the shore of the Azov sea, citing environmental threats posed by the port.
Residents against Akhtarsk Port (North Caucasus Environmental Watch website, in Russian)
WWF Stages “Farewell to Salmon” Performance
On May 29, 2008, the World Wildlife Fund put on a “Farewell to Salmon” spectacle in Pushkin Square in Moscow to raise awareness around the ecological effects of oil development in Kamchatka.
"Farewell to Salmon" (WWF website)
Transneft Opens Public Discussions on Pipeline Construction
On May 19, Transneft began public discussions around the second phase of the Eastern Siberia-Pacific Ocean Pipeline project. A public information center also opened in Vladivostok, and parties are invited to comment.
Analyzing Pipeline Documentation (WWF website, more detail is available on the site’s Russian language version)
Amurskaya Province Supports NGO Recommendations
On May 15, 2008, Amurskaya Province chose to place under its control documentation preparation for the Eastern Siberia-Pacific Ocean Pipeline at the urging of grassroots organizations, including the World Wildlife Fund Russia.
Amurskaya Province Pipeline (WWF website, more detail can be found on the site’s Russian language version)
Baikal Environmental Wave Co-Chair Receives Goldman Prize
The Goldman Environmental Prize was awarded this April to Marina Rikhvanova, co-chairwoman of the Irkutsk NGO, Baikal Environmental Wave, for her work in protecting Lake Baikal.
Goldman Prize to Baikal Activist (Baikal Environmental Wave website)
Transparency International Report on Oil and Gas Companies
On April 28, 2008, Transparency International released a new report on oil and gas companies’ payments to host governments. The 2008 Report on Revenue Transparency of Oil and Gas Companies investigated 42 major companies operating in 21 countries, revealing that only a third of the companies attained a high-performance transparency rating on their reporting and payments to governments. The report includes companies operating in Kazakhstan, Russia and Azerbaijan.
Promoting Revenue Transparency Project (Transparency International website)
Sakhalin Updates
Several environmental organizations have called for the Royal Bank of Scotland to pull its $1 billion loan for Gazprom’s acquisition in the Sakhalin II project. These groups won a victory on March 3 when Sakhalin Energy announced a withdraw of financing, a move that follows the European Bank for Reconstruction and Development’s 2007 decision not to fund the environmentally controversial project. Similarly, the consortium developing Sakhalin has rejected expert recommendations to reroute the pipeline to lesson damages to the habitat of the western gray whales. In April, Sakhalin Environmental Watch found a violation of environmental safeguards during a public assessment of the Sakhalin II pipeline routes. Rybnya River and the Sea of Okhotsk are being contaminated by the mud slides and earth erosion from the reburied pipeline site and road construction.
Environmental Incompliance along Sakhalin II Pipeline Route (Sakhalin Environmental Watch website, in Russian)
Sakhalin II Victory (Sakhalin Environment Watch website)
Sakhalin I Pipe Threat, Expert Panel Conclusions, RBS Pressured, Groups Call for RBS Loan Recall (Pacific Environment website)
Sakhalin II (BIC website)
Taman Beaches Surveyed
Crude Accountability, Environmental Watch on the North Caucuses (EWNC), and Saving Taman have been monitoring the environmental effects of the Russkiy Mir Oil Terminal, a project supported by the International Finance Corporation. On March 15-16, EWNC and Saving Taman surveyed the beaches near the Taman Peninsula and Southern Chushka, uncovering visible fuel oil and a slow cleanup process.
Taman shores after Kerchenski accident (North Caucasus Environmental Watch website, in Russian)
Taman Beaches Remain Polluted, Taman Campaign (Crude Accountability website)
Russkiy Mir II (BIC website)
Referendum on Offshore Drilling in Azov Sea
On February 28, 2008, Temryuk residents called for a referendum to decide the admissibility of offshore drills in Azov Sea. Earlier, on February 19, public hearings were held on projected exploration drills 17 km off Temryuk. Local environmental group За спасение Тамани! (For Salvation of Taman!) collected more than 2,000 signatures against proposed drilling, while Temryuk’s elected counsel voted against the project.
Call for referendum on proposed offshore drilling (North Caucasus Environmental Watch website, in Russian)
EIB Civil Society Workshop
On June 30, 2008, the European Investment Bank will hold a workshop for civil society organizations in Brussels, Belgium. The workshop will be in English and French and include observers from other international finance organizations. For more information and to request an invitation, visit the link below:
EIB Civil Society Workshop (EIB website)
World Bank Development Aid Statistics Workshop
On May 27-28, 2008, the World Bank in Moscow hosted a workshop for development experts to learn about aid statistics and data reporting. Participants came from major international development agencies and government ministries.
Development Aid Statistics (WB website)
IMF Article IV Consultation Report
In October 2007, the International Monetary Fund released its staff report, covering the 2007 annual bilateral meeting with the Russian Federation and a related Public Information Notice.
2007 Article IV Consultation, IMF, 2007 (IMF website, Acrobat pdf 662 KB)
Extended Consultation on EIB’s Environmental and Social Statement
The European Investment Bank has extended the public consultation period for its Environmental and Social Statement until June 20, 2008. A consultation meeting will be held in Warsaw on June 12. With sufficient stakeholder interest, the Bank intends to hold the second round of consultation between September 1 and 28 to seek input on the second draft revised Statement on Environmental and Social Principles and Standards. Submission details and the statement draft can be found at the links below.
Comment Submission Details (EIB website)
EIB Environmental and Social Statement (EIB website, Acrobat pdf)
Public Consultation on EIB's Environmental and Social Statement (EIB website)
EBRD Environmental and Social Policy
On May 12, 2008, the Board of Directors of the European Bank for Reconstruction and Development (EBRD) approved the Bank's new Environmental and Social Policy as well as a new Public Information Policy, one week before the EBRD's Annual Meetings in Kiev, Ukraine.
EBRD 2008 Environmental and Social Policy, May 12, 2008 (EBRD website, Acrobat pdf)
BIC comments on the draft EBRD Environmental and Social Policy, April 8, 2008 (BIC website)
EBRD Public Information Policy
The new Public Information Policy was approved on May 12, 2008, bringing some positive improvements to the previous policy. Civil Society comments on the initial discussion paper called for more transparent and amenable public consultation and disclosure provisions, an independent appeal system, and more timely and automatic disclosure of project impact information. Concerns were also expressed at the disclosure exceptions.
EBRD 2008 Public Information Policy, May 12, 2009 (EBRD website, Acrobat pdf)
Global Transparency Initiative and CEE Bankwatch Network comments on EBRD PIP, December 26, 2007 (GTI website, Acrobat pdf)
Independent Recourse Mechanism Review
EBRD is currently reviewing its complaint review system, the Independent Recourse Mechanism (IRM). It is also expected that a revised version of the IRM policy will be made public late 2008 for an additional round of public comment period that will last through January 2009.
EB Independent Recourse Mechanism (EBRD website, Acrobat pdf)
Study: Weak EBRD complaints mechanism (CEE Bankwatch website)
World Bank Consultations
The World Bank Group is seeking comments on its strategic priorities for civil society engagement. The process will take place from March until July of 2008. Additionally, the bank is drafting an issues paper on Climate Change, which is currently available for comment and will be discussed at the 2008 Annual Meetings. Details can be found here:
Strategic Priorities Framework for Bank – Civil Society Relations (WB website)
Climate Change Global Consultation page (WB website)
World Bank Publishes 16th Russian Economic Report
In June 2008, the World Bank issued the latest Russian Economic Report, which warns of possible economic overheating from inflation, infrastructure limits, and real wage growth. The report can be found at the following link:
Russian Economic Report (WB website, Acrobat pdf)
World Bank and IMF Spring 2008 Meetings Summary
The World Bank and IMF Spring Meetings addressed climate change, rising food and commodity prices, and the global credit crisis. Civil society meetings examined revenue transparency in extractive industries, anti-corruption measures, IMF conditionalities, and a variety of other issues. For summaries of official WB/IMF meetings as well as civil society strategy meetings, see the links below:
Bretton Woods Project (BWP website)
IMF and World Bank - Spring Meetings 2008 (IMF website)
WB and IMF: Revenue and Contract Transparency Assessment
Global Witness and Bank Information Center are conducting an assessment of revenue and contract/licensing transparency implementation in extractive industry operations by the World Bank, IFC and IMF. Preliminary findings of the assessment across 15 resource rich countries revealed that revenue transparency is inconsistent across countries and programs of these institutions. Both civil society involvement and contract transparency were rarely mentioned in institutions’ project/country documents and were only once used as progress indicator upon which further funding was tied. GW and BIC plan to release the final assessment during summer 2008.
New World Bank Website Publishes Company Payments
The World Bank launched a webpage, where IFC clients publish their payment to their host governments starting with operations in 2007. The webpage provides figures for companies that already disclosed payment figures and those planning to do so during June 2008, as well as projects that do not involve payments to the government.
IFC Extractive Industry Clients Government Payment Disclosure (WB website)
Independent Evaluation Office (IEO) Report
The International Monetary Fund leadership has commented on the IEO report of 2008. The report examines IMF governance structures, accountability, and stakeholder involvement. The comments and report can be found at the link below:
IEO Report and the IMF (IMF website)
EBRD 2008 Annual Meetings and Business Forum
Over 2,000 government, civil society, and business actors met in Kiev, Ukraine on May 18-19, 2008, for the EBRD’s Annual Meeting. Civil society groups were critical of the bank’s support of problem projects, such as Arcelor Mittal and Bautino II in Kazakhstan, and of new policies drafted without adequate commentary from civil society. These policies, energy efficiency, and banking systems formed some of the topics of discussion. More information on the meetings and civil society responses can be found at the following links:
2008 Annual Meetings (EBRD website)
Blogs and 2008 Annual Meetings News (IFIwatchnet website)
Comments on New EBRD Policies (BIC website)
EBRD's Annual Meeting (BIC website)
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