World Economy

Moscow Lures East Asian Investors With Exclusive Preferences

Moscow Lures East Asian Investors With Exclusive PreferencesMoscow Lures East Asian Investors With Exclusive Preferences

Russian authorities held the Eastern Economic Forum in Vladivostok on September 3-5 in an apparent attempt to invite East Asian investors into the country’s vast Far Eastern regions. Russia’s top officials came to the EEF to encourage Asian financial inflows into the country’s Far East.

On September 4, President Vladimir Putin told the EEF that Russia offers potential partners “exclusive opportunities and preferences,” including tax breaks and state support of infrastructure development projects. These preferences are offered in a number of Russia’s Far Eastern regions, including Primorie, Khabarovsk, Yakutiya, Amur, Chukotka and Kamchatka regions, ATimes reported.

Residents of Vladivostok free port are eligible to benefit from a larger number of preferences, Putin said. Russia aims at creating a major transportation and industrial hub around Vladivostok to serve the entire Asia-Pacific, he said.

Last July, the Russian authorities revised the country’s legislative provisions so as to give Vladivostok a free port status for 70 years. The laws granted Vladivostok new port privileges such as free customs zones and simplified visa regime, as well as profit and property tax breaks. A free port (porto franco) status envisages relaxed customs regulations and less strict customs controls for transshipment.

The Russian authorities also pledged to develop transportation infrastructure to serve the increased transcontinental freight shipments. Putin told the EEF that Russia aimed to spend 500 billion rubles ($7.4 billion) before 2017 to upgrade the Trans-Siberian and BAM railways so as to funnel more freight between Asia and Europe.

In the past, officials in Moscow repeatedly promised to take action so as to increase railway freight via the Trans-Siberian and BAM routes. However, these promises have entailed limited results so far.

The Kremlin also prioritized energy projects as major drivers of the country’s drift towards East Asia. Russia’s state-run oil giant, Rosneft, plans to invest 1.3 trillion rubles ($19.2 billion) in the Far East, according to Putin.

During the EEF, Rosneft announced a deal to sell a 15% stake in Russia’s Vangkorneft oil company to India’s ONGC Videsh Ltd. for $1.275 billion. In contrast, potential Chinese investors remained slow to acquire a 10% interest in Vangkorneft.

Rosneft also became involved in multilateral Asian energy projects. During the EEF, Rosneft and Japan Drilling agreed to cooperate in developing Vietnam’s Nam Con Son off-shore deposits.

Meanwhile, Rosneft apparently remained focused on energy partnerships with Chinese counterparts. In early September, Rosneft said the company signed preliminary agreements with Chinese energy businesses totaling about $30 billion, including China’s acquisition of 49% interest in Russia’s VSNK and Tyumenneftegaz that control Rusky and Yurubcheno-Tokhomsky deposits.

Russian gas giant Gazprom appeared equally keen to develop energy partnerships with Chinese businesses. On September 3, Gazprom and China National Petroleum Corp signed a MOU on gas supplies from Russia’s Far East to China.

During the EEF, Russian and foreign businesses signed deals totaling some 1.2 trillion rubles ($17.7 billion). However, before the EEF there were expectations that this number could have reached 4 trillion rubles ($59 billion).