One week before last Christmas, the U.S. State Department fast-tracked four European Bank for Reconstruction and Development (EBRD) projects in Serbia, which consisted of a loan to HVB Banka Serbia; an equity investment in Syntaxis Mezzanine Fund I; an equity investment in South Eastern Energy Capital; and a loan to Danube Group Holding of Serbia, which holds a stake in JKR Natural Resource B.V.
The State Department claims that these particular investments “will contribute to a stronger and more integrated economy in the Balkans.” Therefore, Section 561 of the Foreign Operations Appropriations Act (FOAA) was suspended. Section 561 would have prevented U.S. executive directors of the EBRD from voting in favor of these initiatives because of the Serbian government’s noncompliance with the Hague Tribunal.
Why is the United States so eager to fund these projects?
The EBRD is effectively the same as the World Bank, the International Monetary Fund (IMF), or the International Finance Corporation (IFC). All are majority owned and controlled by the governments of five countries, of which the United States is the major player.
The reason for calling the EBRD “European” and not simply the “World Bank” is that the “European” title gives the organization a veneer of being “local” rather than a tool of foreign powers. In reality, all of these institutions are American. The U.S.-appointed leaders of the World Bank—and, by extension, its clones—include such luminaries as Larry Summers (who was recently embroiled in an fraud fiasco with the Harvard Institute for International Development) and Paul Wolfowitz.
The European Bank for Reconstruction and Development is a tool for reshaping post-Soviet European countries in the image of Western Europe. The catchphrase is “restructuring, modernization and privatization.” Practically speaking, that means selling public assets to international conglomerates with discount financing.
The pre-approved EBRD loan will subsidize HVB Banka Serbia, a private institution. HVB Banka Serbia is a subsidiary of Bank Austria Creditanstalt, the largest bank in Austria and a member of the fourth-largest bank in Europe, the UniCredit Group. UniCredit and Bank Austria Creditanstalt operate the most extensive international banking network in Central and Eastern Europe and recently entered into a partnership with the Bavarian HypoVereinesbank Group (HBV Group) to create the HVB Banka Serbia. Despite their colossal size and resources, the partnership receives expedited loans from a government-backed institution (the EBRD) for its Serbian venture. This tax-guaranteed conglomerate will teach the Serbs about private enterprise.
The EBRD will invest at least 25 million euros in a private equity fund called Syntaxis Mezzanine Fund I, which is a limited partnership based in Guernsey (a tax haven). The fund has four philanthropic objectives: building institutions; developing local fund managers; restructuring local companies; and finding new ways of financing companies. The Syntaxis fund managers say they can pursue these objectives while delivering “current income” to investors—which means they will pay dividends now. Giving money back is very odd for a young firm that is supposed to build infrastructure.
The EBRD will buy a ten-percent stake (60 million euros) in South Eastern Energy Capital (SENCAP), a private energy company. SENCAP is a partnership between the Public Power Corporation S.A. (the largest Greek power provider) and an American company, ContourGlobal, which is majority owned by the Wall Street investment firm Reservoir Capital Group.
Proceeds from the SENCAP investment will be used to acquire other energy resources in Serbia, as well as in Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Former Yugoslav Republic of Macedonia, Montenegro, Rumania, and the United Nations Interim Administration Mission in Kosovo. Loans guaranteed by Western governments will allow SENCAP to get a stranglehold on Eastern European electricity—in the EBRD’s own words, they will establish a “new regional player” in the energy market. Would this be with an eye toward Russia?
Finally, there is the EBRD’s 45-million-euro loan to JKR Natural Resource B.V. JKR is a private Dutch company specializing in developing roads and river-ways. The EBRD loan will allow JKR to buy competitor companies in Serbia and consolidate the companies JKR already owns. Thus, the big picture emerges: NATO power-players are handing out tax-guaranteed loans to buddy companies in order to rebuild or buy up the Serbian infrastructure NATO destroyed. That’s good business, if you can get it.
These four projects are steps toward a larger goal. Two crucial state-owned utilities are likely to be privatized soon: EPS (Elektroprivreda Srbije, Electric Power Industry of Serbia) and NIS (Naftna Industrija Srbije, Oil Industry of Serbia). Besides their potential as lucrative investments, these companies are vital to the Serbian economy—and crucial to controlling the country’s politics.
Political control is necessary to fleece any state. And, unfortunately, Serbian politicians are aiding the predatory behavior of these international banks. The “Economy Privatization” Minister Predrag Bubalo parrots the IMF/World Bank’s call for fast privatization, despite the disastrous effects this policy had in Russia. In the six months that politician Mladjan Dinkic was governor of Serbia’s central bank, he paved the way to double the number of foreign-owned banks in Serbia. The bankruptcy law that Bubalo is using to speed the sale of state assets to foreigners was first brought to the Serbian parliament during Dinkic’s governorship. (It was passed in July 2004.) This bankruptcy law was originally drafted by USAID and the World Bank.
When all is said and done, the international financiers will have their tentacles around energy, industry, and commerce in Eastern Europe. U.S. muscle will be used to enforce the new order, but the proceeds will be spread around banking houses in New York and Western Europe. Could the State Department have thought of a better holiday gift?
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