Outlining its new strategy for Russia, the European Bank for Reconstruction and Development (EBRD) said last week that the country is at a "critical juncture" in the direction its economic development might take.

In pledging to increase lending from 217 million euros last year to between 650 million and 750 million euros this year, EBRD President Jean Lemierre singled out corporate governance as a key issue that needs to be addressed if Russia is to become more attractive to investors. He said the bank would be prepared to help the government draw up the necessary legislation.

"We have been asked by the Russian authorities, and we have agreed to help them work on establishing the corporate governance code," Lemierre said. "The key point is to try to improve the system codes, information about rules and how they are implemented."

Russia has suffered chronic problems in corporate governance since the collapse of the Soviet Union. Both domestic and foreign investors – including the EBRD – have found themselves left high-and-dry in scandals that have seen directors allegedly embezzle money from companies or ownership structures manipulated to the detriment of minority shareholders.

But some analysts expressed hope at the proposal, wryly suggesting that there might be no better or more experienced institution to assist in helping draw up corporate governance legislation than the EBRD.

"The EBRD has a lot of personal experience with corporate governance problems in Russia," said Roland Nash, an analyst with MFK Renaissance, with tongue firmly planted in cheek. He was referring to loans the EBRD had disbursed to Russian companies in recent years that disappeared into an apparent black hole.

Nash said, though, that the EBRD did have both practical and theoretical experience with corporate governance – and noted that the government had also been talking a lot about the issue this month.

"What we seem to be seeing now is an EBRD that wants to help the Russian government and a Russian government that wants to be helped," he said.

Still, some observers said that given some of its business decisions – or disasters – in recent years, the EBRD does not have a huge amount of credibility when it comes to Russia. The most notorious of the loans the EBRD was involved in was to TOKO Bank, one of the few financial institutions that went belly-up before the Aug. 17 1998 financial crisis.

Another issue experts pointed to was the yawning gap between what the Russian government has, in the past, managed to legislate for, and what Russian business abides by.

"Implementation has been the biggest problem [for the government]" Nash agreed. "But a necessary condition for any law to be implemented is that it first be put in place. [President Vladimir] Putin has a fairly good relationship at the moment with the parliament, so it will be good for the law to be passed now rather than later."

EBRD President Lemierre also defended Tuesday recent negotiations by the bank toward granting a $150 million loan to natural gas giant Gazprom. The talks had been widely criticized by commentators – mainly because as Russia's largest company, Gazprom would have no problem raising money on the capital markets and, as a result, there were much more worthy businesses to lend money to.

However, the EBRD pointed out that it had not gone to Gazprom wanting to lend the money but that Gazprom had come to the Bank – and the loan is dependent on the company increasing its transparency.

"The question for us is not only to make a loan – any company can make a loan. The question is to get more through that loan, and ‘more' is some elements about the governance of the company," Lemierre said, referring to the EBRD's insistence that the gas giant – with its notoriously murky financial structure –increase the transparency of its operations.

"What we try to do is clear – improve the governance of companies," Lemierre said.

Another of the EBRD's high-profile loans was to Russia's largest oil company, LUKoil, another company that has been the target of complaints about its opaque financial structure.

"These two companies are a bizarre choice [for loans]," Nash said. "The statement by the EBRD says that it wants to attach to the loan the condition of increased transparency by Gazprom.

"Gazprom is notorious for its poor standards of transparency. For instance, no one knows whether ITERA, a company controlled by Gazprom management, has gas reserves or not; no one knows the exact ownership structure of Gazprom. And the politics of the gas giant are legendary," Nash added.

"I would have liked to see a much more targeted use of loans – to small start-up businesses that the EBRD could support and guide."

(The euro is currently worth about 87 cents.)