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Russia provides $70 billions to countries in its nuclear marketing drive

Russia’s $70 Billion ‘Secret’ Spending Lets Money Do the Talking, Bloomberg By 

Evgenia Pismennaya  and Anna Andrianova, — With assistance by Zoltan Simon, July 26, 2017 As state secrets go, Russia’s program of export finance and loans to other nations might be one of the worst kept.

While discussions about aiding cash-strapped allies frequently spill into the open, the Finance Ministry’s debt chief Konstantin Vyshkovsky says information about individual loans isn’t public and a budget addendum on state financial and export credit is classified as “secret.” But, speaking in an interview at his office a short walk from the Kremlin, Vyshkovsky said Russia has committed about $70 billion in total to such loans, a figure that hasn’t been disclosed before. …..

Russia doesn’t make much effort to keep the spending under wraps, using it to grease political ties and pave the way for projects from China to Hungary for its nuclear energy agency, Rosatom. Some loans also go bad, keeping the subject in the public eye. Most recently, crisis-stricken Venezuela failedto make payments on its debt, opening a 53.9 billion ruble ($900 million) hole in Russia’s expected government revenue this year…….

The vast majority of money made available by the government covers export finance, with the borrower getting Russian products and services and a domestic company receiving the funds. Nuclear projects account for 90 percent of the $70 billion total in state loans, followed by the defense industry and civil aviation, according to Vyshkovsky…….

Unlike most nations that offer guarantees in the form of export insurance for loans made out by commercial banks, what makes Russia’s approach unique is that it provides the funding directly from the budget.

As the example of Hungary’s “deal of the century” shows, money talks. A member of the European Union, it scrapped bids for the expansion of its nuclear plant in 2014 and handed the contract to Rosatom after Russia offered to pre-finance much of the project in the form of a 30-year, 10 billion-euro ($11.7 billion) loan that covered 80 percent of the total cost. At the time, the government, still paying higher borrowing costs because of its junk sovereign credit status, said it had secured a loan at “below-market” rates.

While Rosatom has had less luck in countries like Bulgaria, it’s also involved in building a nuclear plant in Turkey valued at some $20 billion. When it comes to such costly projects, few rivals can match the financial muscle of Russia, which is additionally drawn to offer government backing because politics come into play.

“These are major, long-term loans,” said Vladimir Salnikov, deputy director of the Center for Macroeconomic Analysis and Short-Term Forecasting in Moscow. “The presence of not just economic but also political considerations naturally translates into the state’s increased role in giving such projects financial support.” https://www.bloomberg.com/news/articles/2017-07-25/russia-s-70-billion-secret-spending-lets-money-do-the-talking

 

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July 28, 2017 - Posted by | marketing, Russia

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