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. Last Updated: 07/27/2016

EBRD Wants to Double Investment

The European Bank for Reconstruction and Development said Monday it wanted to more than double its investment in Russia next year, despite problems with some of its high-profile projects.

Interfax quoted EBRD head Horst Kohler as saying the bank hoped to raise investment in Russia to between 400 million ($409 million) and 600 million euros in 2000, from 180 million to 190 million euros in 1999.

"The fulfillment of such parameters will first of all depend on improving the investment climate in Russia," he said after meeting Economics Minister Andrei Shapovalyants.

The EBRD planned to raise investment to 1 billion euros in 2003, Kohler said. However, Kohler said Sunday that Russia's investment climate was not improving and the sale last month of a bankrupt oil company Chernogorneft against the wishes of some shareholders and creditors suggested it was getting worse.

Kohler, who met Prime Minister Vladimir Putin on Monday, told reporters Russia's problems went beyond the controversial sale of Chernogorneft, a unit of bankrupt parent company Sidanko.

He said he was concerned that Russian courts, law enforcement agencies and other structures were not working.

"The main problem here is a state that is not properly functioning," he said.

"The investment climate is not improving. And Chernogorneft is an example of it even deteriorating."

Oil group BP Amoco, a major investor in Russia, has a stake in Sidanko and also opposed the sale to Tyumen Oil Co., or TNK, which has turned into a test case for foreign investors. TNK said the process was a legal hostile takeover.

The EBRD, with a mandate to invest in Eastern Europe, is Russia's largest direct foreign investor, with some $1.5 billion invested.

Prime-Tass quoted Kohler as saying Monday that the EBRD would primarily concentrate on lending to small and medium-sized businesses.

He also said the EBRD would cooperate with Russia's agency for restructuring the banking system, ARKO, to help banks which were active in lending to small and medium-sized firms.

RIA agency quoted Shapovalyants as saying he informed Kohler on the situation at the KamAZ truck maker, which the EBRD wants to restructure, and asked what could be done to improve its financial standing.

KamAZ has failed to pay the EBRD some $34 million due on a $100 million loan.

Shapovalyants said another round of consultations with the EBRD was necessary to discuss the situation at the plant.

EBRD deputy vice president David Hexter told reporters that a London arbitration court would take up bank claims on Kamaz.

"The shareholders, the Republic of Tatarstan and the Russian Federation, are not putting sufficient pressure on management to make the necessary radical changes to keep KamAZ as a viable entity," Hexter said.