After the World War II Europe’s economy was almost destroyed. The European economy is one of the most important parts of the world economy, which is why this European economic destruction had damaged the global economy in general. That time was a challenge for the world, it was necessary to create trustworthy and working system which could help recover the world economy. In 1944, the Bretton Woods system of monetary management was established by the United States, Western Europe, Canada, Japan and the USSR. The main financial institutions were the International Monetary Fund and the International Bank for Reconstruction and Development (soon called the World Bank (WB)).
Officially, the WB was established on December 27, 1945, after most of the participating countries ratified the 1944 Bretton Woods Agreement. Now the World Bank Group includes 189 countries.
Originally, the purpose of the WB was the to help rebuild countries’ economy devastated by World War II. In time, the focus shifted from reconstruction to development, with a heavy emphasis on infrastructure such as dams, electrical grids, irrigation systems, and roads. With the founding of the International Finance Corporation in 1956, the institution became able to lend to private companies and financial institutions in developing countries. As the founding of the International Development Association in 1960 put greater emphasis on the poorest countries, part of a steady shift toward the eradication of poverty became the Bank Group’s primary goal. The subsequent launch of the International Centre for Settlement of Investment Disputes and the Multilateral Investment Guarantee Agency further rounded out the Bank Group’s ability to connect global financial resources to the needs of developing countries.
Today, the WB needs to focus on critical issues like climate change, pandemics, and forced migration. The Bank Group plays a leading role, because it is able to convene discussion among its member states and a wide array of partners. It can help address crises while building the foundations for longer-term, sustainable development. (World Bank, 2017)
It has to be noted that the USSR declined to join to this organization as well as to the IMF. However, after fundamental changes in the policy course in the late 1980s, did the Soviet leadership did begin to show interest in establishing links with the WB and the IMF. The result of the meeting of the "Big Seven" in London in 1991 was the entry of the USSR into international organizations as an associate member (Moiseev, 2003). On June 16, 1992, the Russian Federation joined the World Bank Group thus becoming a member of its institutions. Now Russia is a member of the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), the International Development Association (IDA) and the Multilateral Investment Guarantee Agency (MIGA) (The Ministry of Foreign Affairs of the Russian Federation, 2017).
The Russian Federation became recipient of IBRD financing in 1992. Since then, the Bank has approved loans for Russia to fund over 70 projects in various sectors amounting to over $10.5 billion (The Ministry of Foreign Affairs of the Russian Federation, 2017). The Russian legal reform project by the World Bank began in 1996 following a request from the Russian Government. This was understandable. The first reason was the consequences of the Cold War; the other reason: there was no economically and commercially workable civil legal system, nor had the existing legal system ever in its history served the ideology and purposes of an open market society in Russia.
While facing this new dilemma, it must be recognized that for about two decades the World Bank was working on different legal projects in many countries. Some of them failed, some had reasonable support.
However, despite unsuccessful results of judicial reform initiatives in countries such as Bangladesh, India, and Argentina, the WB committed US$58 million on the legal project in Russia. It’s a good example of relationship between Russia and the WB in 1990s. This project appeared to be one of the largest, as well as one of the most unusual and difficult for international donors.
There are numerous points on which the World Bank has been heavily criticized in regard to the legal reforms in Russia. However, the scale of the reforms and initiatives launched by the World Bank in Russia as the unique field of their implementation is enormous. The main objectives of the project launched in Russia by the World Bank in 1996 included: improving the quality of drafting of economic laws; improving the classification and codification of legislation to increase access to legal information; improving legal education through new books, teaching materials, and teacher training, especially in economic law fields; and training of judges in the courts of general jurisdiction and arbitrage courts.
Indeed, the legal reform project in Russia became a challenge for the World Bank. The size of the country, political instability and uncertainties accompanying the transitioning economy, the rush for any countable results to prove the success of reforms due to the political issue of President Boris Yeltsin’s coming re-election campaign in 1996, all might be seen as flaws in the World Bank’s policy implementation because the WB didn't consider Russia’s specific characteristics. Not surprisingly, only 20% of all money directed toward legal reform in Russia from the World Bank was disbursed and utilized between launching the project in 1996 and reporting in 1999 (Makova, 2005).
Russia has changed its status from World Bank borrower to its partner in national socio-economic development and in addressing such global challenges such as poverty reduction, debt cancellation for the poorest countries, and environmental protection. Russia's shareholding in the above-mentioned organizations is about 3 per cent (thus, for example, within the IBRD it is 2.98 per cent (in 2014, Russia subscribed to additional 6,651 shares within a selective capital increase and 14,023 shares within a general capital increase of USD 150 million), in the IFC it is 4.1 per cent (Russia's shareholding amounts to USD 102.8 million), in the MIGA it is 3.13 per cent) (The Ministry of Foreign Affairs of the Russian Federation, 2017).
On December 20, 2011, the Bank's Board of Directors approved the World Bank Group Country Partnership Strategy (CPS) for Russia for the 2012‑2016 fiscal years (the Bank's fiscal year starts on July 1 of the previous calendar year). The indicative amount of the Bank's lending to Russia during the CPS period is set at about USD 5 billion. In 2011-2012, the World Bank started financing three joint projects. In 2013-2014, the World Bank started funding the following other four projects.
Since July 2014, Russia has received no funding from the World Bank as a result of sanctions imposed by the G7. The new cooperation strategy developed by the Bank's employees in 2015 has not been presented to the Board of Directors either. Six out of nine Russian projects, which are new but remain unfunded, have reached an advanced stage of preparedness. These deals were supposed to include their review and approval by the Bank's Board of Directors. The review was scheduled for no later than September 2014 (The Ministry of Foreign Affairs of the Russian Federation, 2017).
However, the G7 has enormous influence (37.89% of total shares) on decision-making policy: the USA has 17.32% of the total shares which gives them «veto» right, Japan has 7.45%, Germany has 4.35%, United Kingdom – 4.07%, France – 4.07% (the World Bank, 2017). Considering the special attitude from Western states to Russia, the projects have not been submitted to the Board because of the announced G7 position not to support the Bank's operations in Russia which was "justifie
d" by the situation in Ukraine. Work on the other three projects that are at the initial stage of preparation has been discontinued: SEZ Promotion in the Russian Federation (the expected Bank loan amounting to USD 132 million), Russian Infrastructure Projects Financing through Vnesheconombank ($300 million), Russian Energy-Efficiency Projects Financing through Vnesheconombank ($500 million) (The Ministry of Foreign Affairs of the Russian Federation, 2017).
Nowadays, we can see the trend that the New Developing Country is becoming more powerful in international arena. For example, in 2007, the largest shareholders were the US (16.4% of shares), Japan (7.9%), Germany (4.5%), Great Britain and France (4.3% each) (РИА Новости, 2008). However, now China places in the third position of the Top 8 countries with voting power with 4.8% of total shares, India has 3.15%, and Russia has 3%. So, in total the BRICS counties have 10.95% of the shares and it helps them to Increase their power and influence in global arena.
But it’s not enough for the member-countries BRICS to pursue to increase their influence in the region and in the world. They have created the New Development Bank that could be a rival for the WB.
China sought to be a more powerful and independent country. That’s why they found the Asian Infrastructure Investment Bank (AIIB). The chartered capital of the organization is $ 100 billion. The AIIB's constituent documents stipulate that its regional shareholders (37 countries, including Russia) own 75% of the bank's capital, and non-regional states (currently 20 countries, including Brazil, Germany, France, Great Britain and Others) have a 25% interest in the AIIB's capital. The headquarters of the bank is located in Beijing. The largest shares of votes in the board of directors are China (26.06%), India (7.5%) and Russia (5.92%) (PenzaNews, 2016).
ABIA currently unites 57 member countries. It is expected that at the annual meeting in June 2017, about 25 new members can join the bank, which will increase the amount of financing for the organization. Official applications for membership in ABIA were filed by Ireland, Canada, Ethiopia, Sudan and other countries. Of the large economies, only the US and Japan are not members of ABIA.
It is noteworthy that in the first year of its operation ABI actively cooperated with other multilateral development institutions like the World Bank (WB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and other national and international structures. This allowed for the improvement of the reputation image of ABIA, reduced the cost of project development and reduced the risks of their lending, while covering a greater number of projects in different countries. Thanks to cooperation with international banks and relying on their many years of experience and knowledge, ABIA has formed an investment portfolio much faster than it would have been possible, if it would have acted alone. It is no coincidence that the expected volume of lending for the year 2016 in the amount of $ 1.2 billion declared in the creation of the bank was exceeded in practice (Gribova, 2017).
Thus, the results of the first year of ABIA's work and prospects for the future can be regarded as very favorable. During the year of its operation, the bank has formed the necessary organizational structure, approved a number of project loans and has accumulated a certain work experience based on compliance with world standards for financing infrastructure. The young international organization has managed to become an equal participant in the system of multilateral international development organizations and to occupy its own niche in the world economy. That’s why the USA which has a big influence in the World Bank consider the AIIB like a rival. Also it’s hard to deny that some of Western countries have already joined to AIIB that means they wanted to be more independent from the USA’s decisions. and these new financial institutions help to Russia increase its influence in the world economy that can help to build new financial system with new financial actors because it’s necessary to have the backup plan in case of collapse dollar-monetary system.