Italian bankers are invited to Russia to place railway tracks

10.10.2011 — Analysis

Italian capital seeks application in Russia. The chairman of the Board of Directors at Banca Intesa Antonio Fallico said that Russia is safe from economic turmoil for the next few years, which enhances its appeal to investors. The banker is willing to participate in financing of a number of major projects in the Urals. The high-speed Ekaterinburg-Moscow railway might be one of them. Experts, however, do not believe that the Italians have serious intentions regarding their participation in the project: The investment feasibility study for the railway has not been prepared and no approval of its construction has been received. The RusBusinessNews columnist has found it out that the Intesa Sanpaolo Group is not involved in financing of projects in Russia, though manufacturers have already noticed its presence on the market, as the Italians have become serious competition to Russian banks.

The construction of the high-speed Ekaterinburg-Moscow railway of 1,600 kilometers long, totaling 1.5 trillion rubles, was offered by the Sverdlovsk regional governor, Alexander Misharin. The project will be developed in two stages: The first stage is scheduled for completion by the 2018 FIFA World Cup when the railroad connects Ekaterinburg and Kazan; then the line will be extended further to Moscow to facilitate commuting for participants of the EXPO-2020 Exhibition (if it takes place in Ekaterinburg) from the Russian capital to the Urals. The issue of the construction tender is expected by the end of 2012. However, it is going to happen only after the approval of the RF government, which has not been issued yet. Therefore, at the moment, Skorostnye Magistrali OJSC is focused on promoting the project and preparing a favorable political decision.

Oleg Dunayev, the head of the expert group at the RF Federation Council, states that the Sverdlovsk regional government has to solve a difficult problem: It should reconcile interests of elite groups, garner support of the top-tier people of the country and find a non-standard solution for the project implementation. The financing system offered today is not realistic: The region counts on federal funds that are not available. The hopes pinned on Russian Railways are also groundless, as the corporation has a lot of other problems.

The Italian bankers arrived in the Urals at the right moment. Antonio Fallico said that in addition to lending money to small and medium-sized business, he would like to participate in projects of large companies. Though Intesa Sanpaolo has no experience in project financing in Russia, the banker promised to look into the possibility of investing in the high-speed railroad from Ekaterinburg to Moscow. He reminded that he is involved in the Russian Railways' project aimed at development of high-speed rail traffic in Russia.

However, A. Fallico's words did not spark any enthusiasm of Russian experts. According to Yevgeni Bolotin, the deputy chairperson of the Ural Bank Union, the banker's phrase was very typical of such cases: "Yes, we are ready to look into the project". However, it is very different from saying: "We have looked into your proposal and are willing to invest 1.5 billion euro". It can take a lot of time until the agreement with the Russian party is signed, but the originators of the high-speed rail idea do not have such time.

Pavel Kurchanov, the head of the unit at the Investment Department of Russian Railways, OJSC, thinks that it is too early to give any comment on A. Fallico's words: "I do not know whether Intesa participates in construction of high-speed railroads. Furthermore, there is still no investment rationale for the project of the Ekaterinburg-Moscow high-speed railway; therefore, there is nothing to talk about".

Vladimir Semyonov, the chairman of the Board of Directors at Uraltransbank, OJSC, is sure that the Italians came to the Urals only to "gain" money. In his opinion, Intesa offers the same products as Russian banks do. Industry needs not only low-interest loans but also technologies. According to V. Semyonov, no one has seen the Italians among the investors in the new Russian industrialization.

Alexander Trakhtenberg, the deputy general director of Lorri, OJSC, does not agree with Russian bankers. In his opinion, Intesa Sanpaolo not only "gains" money in Russia, but also participates in upgrading of the economy in the Lipetsk Region: It finances infrastructure development and finances construction of industrial facilities.

Besides, foreign lenders operate differently from their Russian colleagues. For example, it took only one hour for the BSGV Bank, one day - for the Raiffeisen Bank, and two weeks - for Sberbank to reply the letter from Lorri. Russian banks have a long way to go to become customer-focused - not to mention partnership with industrial companies. Therefore, during the crisis of 2008 their behavior was different from that of the foreign banks. The latter called manufacturers and asked why they did not come for funds. Russian lenders preferred to sit on money bags not to give them away. Manufacturers value that foreign loans are given for eight years and at a lower interest rate, thus helping manufacturers to save millions of dollars. The only issue where representatives of the real sector cannot reach agreement with foreign lenders is assessment of country risks. A. Trakhtenberg asserts that foreign analysis tend to overstate risks related to lending of Russian manufacturing companies, as they are still in thrall to outdated stereotypes.

Due to their lack of confidence in Russia, the Italians may refuse from financing the high-speed Ekaterinburg-Moscow railroad. The project is highly unlikely to come off without foreign capital. Yevgeni Bolotin thinks that it will be difficult to find investment resources in Russia: "We are not able to create inexpensive and sought-after financial capitals. In my opinion, it is the key problem that causes all the other problems: lack of long-term money in the country, citizens' distrust in the banking system, imperfect legislation, etc."

Oleg Dunayev also thinks that the high-speed railway cannot be built without foreign participation: "It should be an international project, because costs are very high. It is obvious that the region should focus all the efforts on solving this particular issue. However, I was in Ekaterinburg not long ago and came to conclusion that there are programs and there are talks, without any actual movement".

Vladimir Terletsky