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Beijing based AIIB puts on hold all activities related to Russia and Belarus due to war in Ukraine

  • Published
    4th Mar, 2022
Context

The China-based Asian Infrastructure Investment Bank has suspended activities relating to Russia and Belarus until further review.

About
  • The bank said its moves come amid the need to “safeguard the financial integrity of AIIB, against the backdrop of the evolving economic and financial situation.”

About Asian Infrastructure Investment Bank (AIIB):

  • The Asian Infrastructure Investment Bank (AIIB) is an international financial institution proposed by China.
  • The purpose of the multilateral development bank is to provide finance to infrastructure projects in the Asia-Pacific region.
  • It is headquartered in Beijing, China.
  • AIIB began operations in 2016 with 57 founding Members (37 regional and 20 non-regional).
  • By the end of 2020, we had 103 approved Members representing approximately 79 percent of the global population and 65 percent of global GDP.
  • Countries accepted as AIIB founding members include China, India, Malaysia, Indonesia, Singapore, Saudi Arabia, Brunei, Myanmar, the Philippines, Pakistan, Britain, Australia, Brazil, France, Germany and Spain.
  • Founding members have priority over nations that sign up later because they will have the right to set the rules for the bank.
  • China is the largest shareholder in the development bank holding 26.5% of its voting power.
  • Russia is the third largest shareholder in AIIB after China and India and the bank has approved two projects across the finance and transport sectors, totalling $800 million.

Governance of AIIB:

  • The Bank’s Accountability Frameworkis an innovative governance model that positions AIIB to embed a culture of accountability throughout the organization.
  • This framework strengthens:
    • The Board’s role in holding the President accountable and establishing AIIB’s policies and strategies.
    • The President’s role in conducting AIIB’s business, including the delegation of projects under set conditions.
  • This governance model includes an Oversight Mechanismin line with principles of transparency, openness, independence and accountability.
  • Since 2017, AIIB has received AAA ratings with a stable outlook from the top credit rating agencies— Standard & Poor’s, Moody’s and Fitch.
  • In 2018, AIIB was granted Permanent Observer statusin the deliberations of both the United Nations General Assembly and the Economic and Social Council, the two development-focused principal organs of the global body.

Response of other international institutions to Russian aggression:

  • The New Development Bank, which finances projects in emerging and developing markets and is sometimes known as the “BRICS bank” had “put new transactions in Russia on hold” amid “unfolding uncertainties and restrictions.”
  • The United States, European nations, and key Asian allies have all imposed tough sanctions on Russia, including measures directly choking off parts of its banking system, deepening the country’s economic isolation.
  • Moody’s ratings agency joined Fitch Ratingsin downgrading Russian sovereign debt to “junk” status, a sign of growing worries over Russia’s ability and willingness to meet its obligations.
  • The European Bank for Reconstruction and Development, for its part, is still weighing measures against Russia and Belarus, including cutting off finance.
    • Belarus is allied with Moscow in the invasion, including allowing its territory to be used as a staging ground.
  • The World Bank Group has stopped all its programs in Russia and Belarus with immediate effect.
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