The International Investment Bank (IIB) is a sanctioned Russian government-controlled multilateral financial institution. Initially formed by the Soviet Union in 1970, it was revived by Russia's government in 2019 when it relocated its headquarters from Moscow to Budapest. 

Initially made up of all Warsaw Pact members led by the Soviet Union alongside Cuba, Mongolia and Vietnam under the Eastern Bloc during the Cold War, IIB's membership was largely maintained until that point. East Germany withdrew from the IIB in 1990 following German reunification, Poland left in 2000 prior to joining the European Union and the Czech Republic and Slovakia (formerly part of Czechoslovakia) exited the organization following the 2022 Russian invasion of Ukraine with Bulgaria and Romania to follow. In April Hungary announced it was leaving as a result of sanctions on the Hungarian management of the bank.

History

Soviet era 

IIB was established in 1970 under the auspices of Comecon. The agreement establishing it was signed by the member states on 10 July 1970 and registered with the UN Secretariat under number 11417. The Bank began its activities on 1 January 1971. The member states of the Bank at the time of its foundation were: the People's Republic of Bulgaria, the People's Republic of Hungary, the German Democratic Republic, the Mongolian Democratic Republic, the People's Republic of Poland, the Socialist Republic of Romania, the Union of Soviet Socialist Republics, and the Czechoslovak Socialist Republic.

Post-Communist era 

Following the Soviet Union's unraveling, IIB membership declined until Russia was the only remaining member. In 2019, IIB relocated its headquarters from Moscow to Budapest. Viktor Orbán gave IIB as well as "guests, business partners, experts" EU residence and full diplomatic immunity. In 2020, the IIB acquired the historic  on a prominent location adjacent to Budapest's iconic Széchenyi Chain Bridge for its head office.

A day after the 2022 Russian invasion of Ukraine, the Czech Republic announced it would speed up its planned departure from the IIB, Romania then started the process to withdraw, followed by Slovakia and then Bulgaria terminated its membership in the IIB. All would request return of funds, including capital of €134.6 million euros.

The exit of most members of the bank withdrawing their investments and the cost of sanctions against the bank, including first Euroclear and then the Belgian government blocking funds in October 2022, has resulted in the bank using up its liquid reserves, putting it at risk of bankruptcy.

In January 2023 it was agreed that the capital of the bank be changed, with Russia converting some capital to debt, allowing the Czech Republic and Slovakia to withdraw their capital without Russia exceeding 50% ownership. Proposed new ownership: Russia 45,44%, Hungary 25,27%, Bulgaria 14,46%, Romania 8,94%, with Cuba, Mongolia and Vietnam holding less than 3% each.

Russia announced in April 2023 that the bank will relocate its headquarters from Hungary back to Russia after Hungary announced it was withdrawing from the IIB, which happened after the bank was sanctioned.

Governance

The Board of Governors is the Bank's supreme collective governing body, consisting of representatives from the IIB's member states. The board of directors is responsible for the general management of the Bank. The Bank's executive body is the Management Board, whose members are appointed by the Board of Governors. The Bank's activities are controlled by the Audit committee, which is made up of representatives from the IIB's member states appointed by the Board of Governors. The Bank's Financial statements are confirmed by a half-year compliance Audit review and an annual audit conducted by international auditors.

Membership

Current members
 
  (1970–2023)

Former members
  (1970–2023, left 15 August 2023)
  (1993–2022)
  (1970–1993)
  (1970–1990)
  (1970–2000)
  (1970–2023, left 9 June 2023)
  (1993–2022)
  (1970–1991)

The IIB statutory documents allow for the admission of either sovereign states or international organisations as members.

Controversy

Connections to Russian spy operations 

With the relocation of IIB's headquarters to EU member Hungary, critics raised that the bank serves as a "Trojan horse" for Russian intelligence operations and spy activities against the European Union. This claim is supported by the fact that the bank's former chief Nikolai Kosov has close ties with Russian intelligence agencies, and that his father was a KGB top operative in Budapest in the 1970s, while his mother was described as “one of the most extraordinary spies of the 20th century”. Kosov has rejected this claim. 

Hungary's Russia-friendly government was also criticised for providing privileges to the IIB, including diplomatic immunity to its staff and exclusion from any regulatory supervision in Hungary. The Government of Hungary announced  the withdrawal of its membership on the 13th of April, 2023.

Sanctions 

In April 2023 the USA sanctioned the bank, IIB Capital and their management for potentially facilitating the evasion of U.S. sanctions against Russia. Subsequently, all correspondent banking entities of IIB in the EU blocked transactions in connection with IIB, including Bank’s nostro accounts in EUR, USD, HUF, CZK and RON.

See also
 Banque Commerciale pour l'Europe du Nord – Eurobank

References 

Multilateral development banks
Banks established in 1970
Supranational banks
Comecon
Banks of the Soviet Union