Global Loans: New BRICS Development Bank to lend $1.2 billion to Russia
The New Development Bank (former BRICS Bank) will provide Russia with $1.2 billion in loans, Izvestia has learned. The money will be used for four infrastructure projects that were frozen due to sanctions in 2022. Before that, $336 million had already been raised for their implementation, the Ministry of Finance said. Funds for these purposes have already been approved, but the question remains - how to technically conduct transactions. The sums allocated are small against the background of how much Russia itself spends on infrastructure projects, so it's not about money. Rather, the resumption of investments from the BRICS Bank is an important political step, confirming that a new financial system is being built in the world, experts say.
What the BRICS New Development Bank is lending to Russia for
The New Development Bank (NDB) will allocate $1.2 billion in loans for Russian projects until 2027 (130 billion rubles at the exchange rate of the Central Bank as of November 29), according to the materials for the budget for 2025-2027 (Izvestia has studied them). Over the entire period of such agreements (since 2017), $336 million has already been raised, the Finance Ministry's press service told the editorial board.
The new development bank was established in 2014 by the "five" BRICS. Its headquarters is located in Shanghai, and the initial authorized capital is $100 billion. The purpose of the organization is to finance infrastructure projects in the states of the alliance. Now it includes nine countries: Brazil, Russia, India, China, South Africa, Egypt, Iran, Ethiopia, and the UAE.
The NDB implements four projects in Russia, recalled in the Ministry of Finance. Details on them are given in the materials to the budget and on the bank's website:
- "Assistance to the development of the judicial system of the Russian Federation" - a total of $460 million in loans (about 50 billion rubles at the exchange rate as of November 29) is planned to be allocated to this project with a maturity date in 2037. The project was approved back in 2017 - it was originally expected to be completed by 2027. The goal is to improve infrastructure and introduce modern technologies;
- "Development of water supply and wastewater disposal systems" - the NDB will provide $320 million for this project, which will have to be repaid in 2038. It was approved in 2018 for six years. The goal is to modernize the water supply system in towns along the banks of the Volga River;
- Two projects for the development of small historical settlements (which ones - it is not specified), they will be financed for $446 million, the loans will have to be repaid in 2030 and 2037, approved in 2018 and 2020 for six years. The goal is to increase the tourism potential of small historic towns.
Russia is interested in such investments, experts believe.
- The needs of the Russian Federation in foreign investment are estimated in hundreds of billions of dollars. In this regard, loans from the NDB can be considered as co-financing of infrastructure and interstate projects," believes Andrei Barkhota, PhD in Economics.
However, the expected volume of financing from the NDB is not so significant - for example, only from the National Welfare Fund this year they plan to allocate almost 900 billion rubles for infrastructure projects (against 130 billion from the New Development Bank over the three-year period).
But it is important from a political point of view. The resumption of investments after a two-year suspension indicates that a new financial system is being built in the world, in which Russia is directly involved. Investments by the NDB will strengthen economic cooperation between the BRICS countries, said Yaroslav Kabakov, Strategy Director of Finam Investment Company.
According to him, for Russia it also means access to long-term financial resources on more favorable terms than in the commercial market. For the NDB it is an opportunity to strengthen its reputation as a reliable international development institution by demonstrating successful cases of infrastructure projects implementation, the expert summarized.
How transfers from the NDB can take place in Russia
In March 2022, the NDB announced the suspension of transactions in Russia due to the sanctions imposed on the country. Projects being implemented in Russia and investments in them were frozen. "Izvestia" sent an inquiry to the financial organization.
However, in October 2024, during the BRICS summit, the head of the Ministry of Finance Anton Siluanov made an encouraging news on this topic.
"A mechanism has been prepared for the possible resumption of these investments and projects that have begun to be implemented. We see that there are certain risks that are expressed by other participants of the New Development Bank. And these risks do not yet allow us to launch a mechanism for resuming financing. Nevertheless, the mechanism has been worked out," said the Minister.
However, he did not disclose what this mechanism is. The press service also did not give "Izvestia" any details on this issue.
According to the materials to the budget, most of the $1.2 billion in loans allocated until 2028 will be used to complete the renewed projects - $920 million. The money will be used for construction, equipment and consulting services.
There is no publicly available information on the terms of the New Bank's loans to Russia. Freedom Finance Global analyst Vladimir Chernov assumes that the interest on the loans should be lower than market interest rates - at the level of 3% per annum. Yulia Kovalenko, associate professor at Plekhanov Russian Economic University, believes that the rates may vary from 5 to 6%.
As for the mechanisms for renewing investments in the Russian Federation, it could be digital financial assets, the expert suggested.
- The NDB can work through third friendly countries, such as India and China. Financing can also take place through independent funds and organizations that are not formally linked to the bank, but are affiliated with its participants. This will reduce the risk of direct sanctions pressure on the financial organization," said Farhad Ibragimov, an expert of the PFUR Economics Department.
Most likely, mechanisms for nominating loans in currencies that are not subject to restrictions, for example, in yuan, will be involved, added Antonina Levashenko, head of the OECD Center of IPEI of the Presidential Academy.
In the future, the NDB may invest in the development of alternative payment systems, such as Mir or China's CIPS, Farhad Ibragimov believes. The BRICS countries are already actively working on the creation of financial services independent of the dollar. The bank is likely to become a tool for the realization of this strategy, the expert noted.
