The European Bank for Reconstruction and Development is providing funding to Tbilisi City Hall to purchase metro cars for the Georgian capital’s metro system from Russian company Metrowagonmash. But Metrowagonmash is not just any Russian company.
Mariam Patsatsia, Community Support Coordinator, Georgia | 13 March 2023
Links with the Kremlin and Russia’s defence industry
Metrowagonmash is part of Transmashholding, whose shareholders Russian oligarchs Iskander Makhmudov and Andrey Bokarev – are closely linked with the Kremlin and its defence industry. In 2015, Bokarev and Makhmudov became two of the largest government contractors in Russia. Until 2017, they, along with Russia’s current deputy defence minister Alexei Krivoruchko, also held shares in JSC Kalashnikov Concern, which manufactures around 95 per cent of Russia’s guns.
After leaving Kalashnikov, the partners continued to provide engines for Russian warships through Metrowagonmash’s sister company, as evidenced in the company’s 2018 and 2019 annual reports. In 2021, Transmashholding tried to expand its capabilities in motor production by acquiring Bergen Engines from Rolls-Royce. Citing security risks, the sale was blocked by the government of Norway. In a statement issued on 23 March 2021, the Ministry of Justice and Public Security of Norway said: ‘The engines they [Bergen Engines] produce would have had great military strategic importance for Russia, and it would have strengthened Russia’s military capabilities in a way that would clearly be at odds with Norwegian and allied security policy interests.’
Notably, Andrey Bokarev was among the billionaires and tycoons that met Russian president Vladimir Putin on the day Russia attacked Ukraine. After the invasion, both Makhmudov and Bokarev were sanctioned by Ukraine, the United Kingdom and New Zealand.
The unexplained backtracking of the EBRD and Tbilisi City Hall
The Tbilisi Metro Project, which is co-financed by the Green Climate Fund, received finances from the EBRD in 2020 and the Russian supplier was selected in a two-tier tender in 2021. Russia’s invasion of Ukraine changed the context and stalled the official procurement procedures with Metrowagonmash.
In March 2022, the EBRD suspended a transfer to the Russian company due to the risk of sanctions. In November 2022, the mayor of Tbilisi announced that the municipality and the EBRD had decided to terminate the contract and were in contact with alternative suppliers. Yet in February 2023, a Tbilisi City Hall representative said that Metrowagonmash would remain on as the supplier, as it provided the most affordable tender proposal. The mayor of Tbilisi also stressed that he was forced to keep the existing agreement to avoid the imposition of fines and financial sanctions on the state – although it is not clear who would impose these. The company has agreed to supply 44 wagons (11 sets) at a cost of EUR 49.2 million. According to City Hall, the original agreement was renegotiated with an added provision that payment to the company will only go ahead once the metro cars are received.
We urge the Bank to terminate the contract with Metrowagonmash and find an alternative supplier for the project.
Despite our multiple attempts to obtain more information, the EBRD has not yet responded to our queries about the project.
Bankwatch and Green Alternative call on the EBRD to clarify:
- why it reversed its decision to suspend payment to Metrowagonmash;
- why it stands behind its decision to retain Metrowagonmash, whose sister company supplies engines to Russia’s Ministry of Defence and whose parent company’s shareholders are sanctioned by the UK, as a supplier for the project;
- whether it has assessed the risks associated with the project’s main supplier and with the supply chain in accordance with EBRD’s Environmental and Social Policy;
- whether it has fully considered the direct or indirect involvement of the main supplier in the armed conflict through its activities and connections and, furthermore, how this might increase environmental, social and human rights risks;
- whether it is aware of any financial losses, sanctions or fines likely to be imposed on Tbilisi City Hall if the contract is to be terminated and by whom.
Let us not forget that in April 2022, the EBRD Board of Governors decided to deny the Russian Federation access to the Bank’s resources with immediate effect. In addition, the Bank noted that it ‘avails itself of all rights to suspend or cancel further disbursements of funding on existing projects’.
The EBRD prides itself on the support it provides to Ukraine amid the war. But actions that might enrich Russia’s wartime coffers undermine and taint this effort. They also cast doubt on the EBRD’s commitment to Ukraine and call into question the future status of ongoing projects with Russian suppliers.
Providing metro cars to Tbilisi should not present a moral dilemma either for Tbilisi residents or for European taxpayers.
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Theme: EBRD funding for Russia
Tags: EBRD Green Cities | Georgia | Green cities | metro | urban transport