The New Development Bank (NDB), also known as the “Brics Bank” has suspended loans and financing to Russia. The announcement was made on Thursday (3) in a statement released by the bank.
The move was taken amid the worsening Russian invasion of Ukraine and recent economic sanctions imposed by countries such as the United States, the United Kingdom and the European Union.
The decision suspends the approval of new projects presented by Russia and the disbursements for projects already approved and that depended on the transfer of resources from the bank.
In the announcement, the bank does not mention the war in Ukraine, but mentions a scenario of “uncertainties and restrictions”.
The NDB was founded in 2015 by the countries that make up the Brics group: Brazil, Russia, India, China and South Africa.
It was created as an alternative for countries in the bloc to obtain financing for projects in areas such as infrastructure and development outside the main financial markets of the world. Each of the countries contributed at least US$ 10 billion to form the bank’s initial capital.
“In light of the unfolding uncertainties and restrictions, the NDB has suspended further transactions with Russia. The NDB will continue to conduct business in full compliance with the highest compliance principles as an international institution,” reads an excerpt from the statement released today by the Bank.
BBC News Brasil found that the decision was taken by the institution’s management, led by the former special secretary for Foreign Trade and International Affairs at the Ministry of Economy, Marcos Troyjo. He was nominated for the post by Economy Minister Paulo Guedes in 2020.
A source interviewed by the report stated that the decision was “technical” and that the Brazilian government was not consulted about it. The measure was communicated by the bank’s board to members of the Brazilian government at a meeting this Friday morning (4).
According to this source, the main reasons for suspending operations with Russia were the projected difficulties for the country to meet its financial commitments after a series of rounds of economic sanctions imposed by the United States and the European Union.
As the NDB transfers and receives funds through international banks, the assessment is that, in the midst of the sanctions, financial channels with Russia should be compromised. In addition, the fact that the main risk rating agencies had downgraded the country’s rating weighed in the decision.
On Thursday, Standard & Poors downgraded Russia’s rating from BB+ to CCC-. The reduction in the rating is an indication for investors of a country’s ability to meet its commitments.
BBC News Brasil sent inquiries to the bank, but until the closing of this article, no response had been sent.
Financial siege closes
The NDB announcement closes yet another option for Russians to get international funding.
According to official data, Russia has approved projects with the bank totaling US$ 4.8 billion, equivalent to R$ 24.3 billion.
The amount corresponds to 17% of the total amount that the bank has lent to the bank’s member countries since its creation, which totals US$ 29 billion. The money had been used to finance infrastructure projects in different parts of Russia.
The bank’s decision draws attention because, in recent days, BRICS members have shown hesitation to openly condemn the actions taken by Russian President Vladimir Putin.
On Wednesday, the United Nations (UN) General Assembly passed a resolution condemning the Russian action.
Of the five countries that make up the BRICS, only Brazil voted in favor of the measure. China, India and South Africa abstained. Russia, of course, voted against the resolution.
Despite the Brazilian position at the UN, President Jair Bolsonaro has not publicly condemned the measures taken by the Russian president.
Asked whether he would apply sanctions to Russia, Bolsonaro said on Thursday that the most sensible position for the country was to maintain balance in relation to the conflict.
“We don’t have the capacity to resolve this issue, so balance is the most sensible position for the federal government,” he said.
In recent days, he mentioned the fact that Brazil is dependent on exports of Russian fertilizers used by Brazilian agribusiness.
Sanctions and economic impacts
Amid the escalating violence in the region, several countries have announced rounds of economic sanctions against Russia.
On Wednesday, the European Union announced the suspension of seven Russian banks from Swift, a global financial transaction system used by the world’s leading banking institutions. The measure affects the ability to transfer resources into or out of Russia.
The measure, according to the bloc, aims to target banks that are linked to military action. The United States has also imposed sanctions on Russian banks and created measures to prevent Russia from being able to finance its sovereign debt at home and with European allies.
In addition, credit card operators such as Visa and Mastercard announced the suspension of their activities in the country.
On Thursday, another multilateral bank, the Asian Infrastructure Investment Bank (AIIB) announced the suspension of its projects with Russia and Belarus, a country allied to the Vladimir Putin regime.
Since the beginning of the sanctions, the Ruble (Russian currency) has recorded historic drops in its value against the dollar.
In Moscow and other cities in the country, lines of customers were recorded trying to withdraw money from ATMs in an attempt to avoid the consequences of a possible collapse of the local banking system.
Russia’s invasion of Ukraine began on February 24. According to the Russian president, the action is aimed at the “denazification” of Ukraine. The Ukrainian government, on the other hand, claims that the invasion is aimed at controlling the country.
The invasion has been condemned internationally by several countries and international organizations. According to the United Nations High Commissioner for Refugees (UNHCR), more than one million people have already left Ukraine for countries such as Poland, Romania and Hungary.
The death toll cannot be independently verified, but according to the UN, at least 227 civilians have been killed. The number of soldiers victims of the conflict cannot be verified either, but the Ukrainian government said two days ago that at least 5,000 Russian soldiers had already been killed since the beginning of the conflict. Russia does not confirm these data.
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