* EBRD's main shareholders don't want it to stop lending
* Action in EBRD complicated as Russia is shareholder
* Suspension of EIB funding was an option in EU document
By Tom Körkemeier and Marc Jones
BRUSSELS/LONDON, July 3 European Union
governments have discussed halting or restricting funding for
new projects in Russia through two multilateral lenders as they
seek to raise pressure on Moscow to support a peace plan for
Ukraine, officials said on Thursday.
Officials have looked into stopping lending for Russian
projects through the EU's bank, the European Investment Bank
(EIB), and the European Bank for Reconstruction and Development
(EBRD), an EU diplomat and a German government source said.
No decisions have been made but the German source indicated
that discussions could restart if no agreement was reached by
the end of the week on establishing a ceasefire and
de-escalating the situation in eastern Ukraine.
But a senior source at the EBRD said the bank's main
government shareholders did not want it to stop lending in
Taking action at the EBRD would also be complicated as
Russia is one of 64 countries that are shareholders of the bank.
Russia has traditionally been the biggest recipient of the
London-based EBRD's funds - it lent 1.8 billion euros ($2.46
billion) there last year. The EIB pledged to lend more than 1
billion euros to Russia last year.
The EU has threatened for months to impose tough economic
sanctions on Russia unless it helps to reduce tensions in
eastern Ukraine, where hundreds have been killed in clashes
between government forces and pro-Moscow rebels.
So far, the EU has imposed measures targeting around 60
people in Russia and Ukraine with asset freezes and travel bans,
as well as two energy companies in Crimea, to punish Moscow for
taking over the Ukrainian peninsula earlier this year.
But the 28 EU nations have been divided about pressing ahead
with more far-reaching measures, with some governments fearing
retaliation from a major energy supplier.
EU governments decided on Tuesday they would not immediately
impose new sanctions on Russia but discussions in committees
have continued and EU ambassadors are expected to discuss the
Ukraine situation again on Monday.
Any decision on hard-hitting economic sanctions would be for
EU leaders, who are due to meet again on July 16.
The foreign ministers of Russia and Ukraine agreed in Berlin
on Wednesday to hold three-way talks involving pro-Moscow rebels
by Saturday to pave the way for a new ceasefire.
The senior EBRD source said the bank had sounded out its
main shareholders in the Group of Seven advanced economies only
last week and found there was no change in the consensus view
that lending to Russia should continue.
"Our shareholders want us to keep engaging in Russia," the
source said on condition of anonymity. "As far as we can tell,
nothing has changed since our annual meeting in May."
The bank has already hinted it will scale down its lending
to Russia this year, although it has framed it as a response to
the country's economy slowing in response to the Ukraine
Neither the EIB nor EBRD has recently announced new lending
to Russia on its website.
Suspending EIB funding to Russia was mentioned as a possible
option in a paper drawn up by the European Commission in April
which assessed the impact of imposing various economic sanctions
One of the options mentioned under the "low-intensity
sanction scenario" was "suspension/reduction of development
assistance and EIB funding to Russia," the document, seen by
A spokesman for the EIB said: "The European Investment Bank
is the EU bank and acts in full accord with the EU positions."
A European Commission spokesman said he could not confirm or
deny any possible measure being considered by member states.
($1 = 0.7331 Euros)
(Additional reporting by John O'Donnell and Adrian Croft in
Brussels and Andreas Rinke in Berlin; editing by Andrew Roche)