Bank Takes Steps to Minimize Exposure to Erdogan Regime Risk Following FATF Grey Listing

(Washington, D.C.) — The Turkish Democracy Project (TDP) commends the European Bank for Reconstruction and Development (EBRD) for minimizing its exposure to Erdogan regime associated projects, ensuring that its investments in Turkey are not misused or diverted to support President Erdogan’s growing authoritarianism. The EBRD acknowledged the fundamental risk of government projects in Turkey, emphasizing that “90 percent of its portfolio in Turkey is ‘private’” and that public sector investments were subject to enhanced scrutiny, particularly following the FATF’s grey-listing of the country in October 2021.

On December 3, 2021 TDP sent a letter to Odile Renaud-Basso, President of the EBRD, seeking clarification on EBRD’s investments in Turkey given the legal, reputational, commercial, financial, and moral risks of investing in the Turkish construction and energy sectors and thereby supporting President Erdogan and the governing Justice and Development Party (“AKP”).

TDP described the corruption, abuses of power, and human rights violations associated with President Erdogan and his cronies’ misuse of the Turkish energy and construction sectors:

Degradation of the rule of law, rampant tender rigging, and a lack of oversight mean that any contracts carried out in Turkey will require a disproportionate amount of due diligence to ensure both that return-on-investment assumptions are reasonable, and that any Turkish companies involved in business ventures have not already participated in illegal activity such as sanctions evasion, money laundering, or financing of extremism.”

In a letter dated December 29, 2021 the EBRD emphasized its minimizing of portfolio exposure to Turkish public sector projects, stressing the importance of its “corporate anti-corruption compliance drivers, mechanisms and policies.”

Specifically, the EBRD described the heightened and enhanced scrutiny of its investments in several Turkish public sector projects that have been associated with malign activities related to the AK Party, including the Gaziantep Solar Project, the Istanbul Basaksehir Cam and Sakura City Hospital, Bursa Hospital PPP, Ankara Etlik Hospital PPP, and Gaziantep Hospital PPP. The EBRD further described its heightened and enhanced scrutiny of its investment in Ronesans Holdings, which recently made headlines for evading more than $200 million in taxes.

According to the EBRD, ongoing compliance checks will be performed throughout the life cycle of these projects and “Where wrongdoing is suspected or found against any entity or individual, the Bank will take appropriate action.”

Commenting on the EBRD’s response, Ambassador Mark D. Wallace, CEO of the Turkish Democracy Project said:

“We applaud the EBRD for minimizing its risk exposure to Turkish public sector projects and to ensure enhanced and heightened scrutiny of existing projects. The EBRD’s experience is a cautionary tale for any responsible business. The few Turkish government projects in which the EBRD has invested in Turkey have since become hotbeds of corruption and cronyism. Given these concerns, no responsible business should work with or invest in the public sector in Erdogan’s Turkey, and should refrain from association with private businesses aligned with Erdogan, the AK Party, and in particular any AKP-affiliated oligarchs who have made millions off of the Turkish state—and the Turkish people.”