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The New Development Bank — created by Brazil, Russia, India, China and South Africa to fund infrastructure projects — also announced Thursday it would put new transactions in Russia on hold, citing “unfolding uncertainties and restrictions.”
China has substantial stakes in the two banks, with a more than 30% shareholding in the AIIB and 19% in NDB. Australia, most European nations as well as Russia are members of the AIIB, while Ukraine is not.
The moves by the two development banks follow recent steps by China’s largest state-owned banks to restrict financing for purchases of Russian commodities.
Gabriel Wildau, a managing director at New York-based advisory firm Teneo Holdings, said last week any continued support from the largest Chinese banks would risk triggering secondary sanctions from the U.S. and EU. China’s policy banks rely substantially on the U.S. dollar system, as they offer loans for the Belt and Road Initiative mostly in U.S. dollars, he noted.
The AIIB has two approved projects in Russia with total loans of $800 million, according to the bank’s website. One of the loan facilities was extended to the Russian government to “improve road network connectivity in key economic corridors.” The other was meant for replenishing working capital of rail transportation service provider Russian Railways JSC due to Covid-19 impact.
The lender has a third loan of $300 million proposed to help Russian Railways finance purchases of freight and passenger electric locomotives.