Accessibility links

East: Former Comecon Bank Poised For Revival

  • Mark Baker

Top bankers from Eastern and Western Europe, attending a conference in Prague this week, heard of an ambitious plan to relaunch a bank connected to the long-disbanded Council for Mutual Economic Cooperation, or Comecon. The head of the Moscow International Investment Bank told participants that the bank could start operating as soon as 2003 if the Russian Federation makes good on a promise to pay back debt. Conference participants from Western and Central Europe expressed polite enthusiasm for the bank but privately wondered whether it is necessary. Top bankers from Belarus and Ukraine were more favorable.

Prague, 28 March 2002 (RFE/RL) -- International bankers attending a conference in the Czech capital, Prague, this week heard of ambitious plans from a Russian banker to relaunch the financing arm of Comecon, the International Investment Bank.

The chairman of the Moscow-based bank, Mikhail Sarafanov, told conference participants the Russian Federation has agreed in principle to pay back about 1 billion euros ($850 million) in debt it owes to the bank. Sarafanov said if the technical details of the settlement can be worked out -- which analysts say would be no small feat -- the bank could re-enter international markets with around 500 million euros in capital by 2003.

The International Investment Bank was the financing arm of the Council for Mutual Economic Assistance, or Comecon. The bank went dormant after Comecon was disbanded in the early '90s. Sarafanov said the bank was "clinically dead" during this time, as it had lost its financial capital.

If the International Investment Bank succeeds in relaunching itself, it would be one of the last existing remnants of Comecon, which was established after World War II to serve as a Soviet version of the U.S. Marshall Plan and ended up lasting some 40 years. Original members included the Soviet Union, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania. Membership was later expanded to Cuba, Mongolia, and Vietnam.

In the early years, Comecon described its activities as promoting cooperation between the Soviet Union and its European allies. In the last decades of its existence, Comecon actively promoted economic integration of communist states. It was often criticized as serving Moscow's needs at the expense of other members.

Sarafanov said the newly christened International Investment Bank would be devoid of Comecon's political interests and would function much more like a modern multinational investment bank, on the order of the Greece-based Black Sea Trade and Development Bank. The owners of the bank would remain the original Comecon members, including the newly independent countries of the former Soviet Union.

Participants at the conference expressed polite enthusiasm at the prospect that part of Comecon might begin operating again. But privately they spoke of doubts that the new bank is needed and whether Russia would make good on its promise to repay its debt. Many of the bankers in attendance -- from the Central European and Baltic states -- see their destinies as lying to the West, not the East.

But at least one participant at the conference, Belarus National Bank Governor Pyotr Prokopovich, openly welcomed the idea: "Today, the demand of investment resources for the countries of the Commonwealth of Independent States, and for those of Eastern and Central Europe as whole, is very important. And the current financial instruments for this need are not sufficient. Therefore, we can only welcome the appearance of a new financial institute, a new international bank for investment. This is a good, positive decision. The more investment banks we have, the better it will be for our countries."

Prokopovich's enthusiasm was shared at least in part by one of the Ukrainian representatives to the conference, Oleksandr Sharov. Sharov is the director of the international department of the Ukrainian National Bank.

He said no one wants to return to the days of Comecon and forced political and economic integration. But he pointed out that the countries of the Commonwealth of Independent States (CIS), like Ukraine, are starving for investment funds.

He told RFE/RL that any additional sources of funds are welcome: "If this bank can offer good loans and investment, as [bank chairman Mikhail] Sarafanov mentioned, then why not? Of course, we are interested in the International Investment Bank, as well as development of the Interstate Bank of the CIS. If this bank can support our industry, our trade, of course we are interested to be active in management of this bank and in cooperation with this bank."

The two-day conference was sponsored by the Prague-based Comenius Society. Participants included the central bank governors of Belgium and Ukraine, as well as Belarus, and two presidents of federal reserve banks in the United States.

(RFE/RL's Bruce Pannier assisted with this article.)

XS
SM
MD
LG