The European Bank for Reconstruction and Development (EBRD) is facing criticism for funding the purchase of metro cars from a Russian rolling stock manufacturer, Metrovagonmash, for the Georgian capital's metro system. 

Metrovagonmash is part of the larger Transmashholding, whose shareholders, Russian businessmen Iskander Makhmudov and Andrey Bokarev, are closely linked with the Kremlin and its defence industry, said Bankwatch, a financial institution watchdog, in a report published on March 13. 

Metrovagonmash won a tender in December 2021 to provide 44 wagons for Tbilisi's metro system, with a total value of €49mn. The project is co-financed by the Green Climate Fund, the Tbilisi city government, and the Tbilisi Transport Company through a loan from the EBRD.

The decision to use Metrovagonmash as the supplier was made despite concerns over potential international sanctions, with the Tbilisi mayor's office stating that the agreed price with Metrovagonmash was significantly more affordable than other alternatives, which would have cost 30-35% more.

The EBRD suspended a transfer to the Russian company in March 2022 due to the risk of sanctions, but in November of the same year, the mayor of Tbilisi announced that the municipality and the EBRD had decided to terminate the contract and were in negotiations with alternative suppliers. 

However, in February 2023, a Tbilisi City Hall representative said that Metrovagonmash would remain as the supplier due to their affordable tender proposal, and to avoid the imposition of fines and financial sanctions on the state.

Bankwatch has urged the EBRD to terminate the contract with Metrovagonmash and find an alternative supplier for the project. The group claims that the EBRD's decision to continue working with the Russian company provides indirect support to companies affiliated with the Kremlin and encourages trade with Russia through their financing.

“International financial institutions, including the EBRD, have halted their lending to Russia in response to Russia’s aggression against Ukraine. But this is not enough. Banks should take appropriate measures to prevent any indirect support to companies affiliated with the Kremlin and should not encourage trade with Russia through their financing,” said Mariam Patsatsia, a representative at Bankwatch.

The controversy over the EBRD's decision to fund Metrovagonmash comes as Western governments continue to impose sanctions on Russian individuals and entities with ties to the Kremlin. The EBRD has yet to respond to Bankwatch's requests for clarification on its decision to retain Metrovagonmash as the supplier for the Tbilisi Metro Project.

When reached for comment back in February, the EBRD told bne IntelliNews “that the tender for the procurement of metro trains conducted by the Tbilisi Transport Company in 2021 was executed in compliance with the EBRD Procurement Policies and Rules”. EBRD declined to answer bne IntelliNews’ questions about the purchase.