EBRD Faces Rare Loss Due To Russia, Ukraine Crisis
By Marc Jones
LONDON, Jan 14 (Reuters) -- The European Bank for Reconstruction and Development will probably report its first loss since the global financial crisis due to turmoil in Russia and Ukraine, the development bank's Vice President Andras Simor said on Wednesday.
Simor told Reuters that a fall in the value of its Russian equity investments due to the rouble's slide as well as provisions against other losses in both countries meant an overall loss for 2014 was likely.
The EBRD has suffered only five annual losses since it was created in 1991 originally to invest in the former Soviet bloc countries of eastern Europe, most recently in the crisis years of 2008 and 2009.
Now it faces major writedowns due to the sharp drop in the rouble and Ukraine's hryvnia currency since Moscow's annexation of Crimea in March, which prompted Western sanctions, and the plunging price of oil, Russia's main export earner.
"We will probably end up with a loss at the end of the year (2014)," Simor said in an interview. "But that is exclusively down to valuation (of the Russian equity portfolio) and provisioning."
Since its creation, the ERRD has expanded beyond the ex-communist countries. But Russia remains its biggest area of activity with 5.8 billion euros invested in the country in the form of equities, project loans and other forms of financing. Ukraine is third biggest, behind Turkey, with 3 billion.
About a quarter of the bank's overall exposure is to Russia, with 10 percent to Ukraine, where an uprising by pro-Russian rebels in the east has helped to shatter its economy.
"The devaluation of the rouble has hit the value of our equity portfolio and we have to accept that," said Simor. "Our role is not only to be there when the sun shines, but also in the storms."
The Russian equity portfolio was worth an estimated 3.2 billion euros at the start of 2014 but the 35 percent drop in the rouble against the euro since then will wipe over a billion off that value.
Simor, the former head of Hungary's central bank, said this 35 percent drop would be "a good guide" for the losses its equities portfolio were likely to have suffered.
The overall 2014 shortfall is not expected to be as steep as the near 1.4 billion euro combined losses in 2008 and 2009, thanks largely to profits made in other countries such as Turkey where the EBRD is building up its presence.
From our newsroom:
The United States and Britain are promising to maintain pressure on Russia over its intervention in Ukraine.
U.S. President Barack Obama and British Prime Minister David Cameron made the pledge in a joint opinion article in the January 15 edition of the Times of London ahead of two days of meetings in Washington.
The United States, the European Union, and other nations have imposed a series of sanctions on Russia over its annexation of Crimea last March and its support for separatists whose seizure of territory in eastern Ukraine sparked a conflict that has killed more than 4,700 people since April.
"Our strong and united response has sent an unmistakable message that the international community will not stand by as Russia attempts to destabilize Ukraine," Obama and Cameron wrote.
"If we allow such fundamental breaches of international law to go unchecked, we will all suffer from the instability that would follow," they wrote.
Obama and Cameron are to have a working dinner on January 15 and hold more talks on January 16.
Based on reporting by the Times, Reuters, and BBC
By RFE/RL's Georgian Service
TBILISI -- Georgian authorities say a man from the South Caucasus nation has been killed fighting in eastern Ukraine.
On January 15, the Foreign Ministry confirmed earlier reports saying that a Georgian national was killed in Ukraine’s Donetsk region, where government forces are fighting pro-Russian separatists in a conflict that has killed more than 4,700 people since April.
Ministry officials identified the Georgian as Shalva Bukhaidze, 30.
They did not say which side he fought on.
Reports have said that there are many volunteers from former Soviet republics fighting on both sides in the conflict in the Donetsk and Luhansk regions.
Last week, authorities in Tajikistan said one of its citizens was killed fighting alongside the separatists, who Kyiv and NATO say have direct military support from Russia.
In December, a court in Kazakhstan sentenced a Kazakh citizen, Yevgeny Vdovenko, to five years in prison for fighting in Luhansk, also on the side of the separatists.
Ukraine Steps Up Mobilisation, Warns Of Renewed Russian "Aggression"
KIEV, Jan 15 (Reuters) -- Ukraine's parliament voted on Thursday to refresh its front-line forces and resume partial conscription after a top security official warned that Russian forces backing separatist rebels had sharply increased military activity in the east.
"Russian aggression is continuing. There has been a significant surge in the intensity of firing," Oleksander Turchynov, secretary of the national defence council, told parliament, adding that 8,500 Russian regular forces were now deployed in eastern Ukraine.
Two Ukrainian soldiers were killed and four wounded on Wednesday when Ukrainian positions were fired on 129 times, which Turchynov said was a record for this year so far.
The warning of increased military activity by Russian forces also followed the shelling of a passenger bus on Tuesday at an army checkpoint in which 12 civilians were killed. Kiev blamed the separatists for the attack but they denied responsibility.
Despite what the West and Kiev say is incontrovertible evidence, Moscow denies it has any troops in the east of Ukraine where pro-Russian separatists are fighting government forces in a conflict in which more than 4,700 people have been killed.
Ukraine's parliament supported a decree of President Petro Poroshenko to swap out long-serving troops at the front and to bring in veterans from the reserve as well as resume partial conscription.
Ukraine scrapped compulsory military call-up in 2013 before the ousting of a pro-Moscow president, Viktor Yanukovich, which sparked the confrontation with Russia.
"There is an urgent need to strengthen the combat and mobilisation readiness of our forces and other military forces up to a level which guarantees an adequate reaction to threats to national security from continuing Russian aggression," Turchynov said.