Petr Fradkov: VEB supports all initiatives within the New Silk Road Project

TV Channel Russia 24
INTERVIEW
26.08.2015, 06:36

HOST: Vnesheconombank supports all initiatives within the New Silk Road Project. First Vnesheconombank Deputy Chairman – Member of the Board Petr Fradkov told us what projects VEB was interested in.

CORR: Petr Mikhailovich thank you very much for finding the time to give us an interview. Let’s formulate our theme in the following way: “The Silk Way” - an idea which is pushed forward for the most part by China and backed by a whole number of other countries. How do you size up its prospects and how can Russia above all benefit from it?

Petr FRADKOV, First Vnesheconombank Deputy Chairman – Member of the Board: I’m very positive about this project and Vnesheconombank supports all initiatives within this project. We believe that landmark Silk Road projects are sure to be implemented whether it be construction of new infrastructure facilities, port facilities or logistics terminals. This would expand trade and economic sanctions. We can also speak about financial instruments, some non-financial measures of cooperation but we need infrastructure, we need channels to transport goods. Increased trade turnover is an ultimate result we focus on. On the one hand, this would have a positive impact on export surplus, budget revenues and new jobs and on the other hand, this would make it possible to export Russian products to Asian countries’ markets. This is a very important task because it includes exports support, in which Vnesheconombank is involved, boosting our global competitiveness as well as logistics, port facilities, transshipment terminals and storage facilities. In our opinion we have to address this task jointly.

CORR: Quite often Chinese companies receive pretty large shares in our companies. Won’t we become too dependent on the Celestial Empire?

Petr FRADKOV: I believe that it’s too early to speak in such a way because Chinese companies’ participation in the past years has been rather small. By the way, we focused more on cooperation with Western companies. And now it’s too early to say that we are somehow dependent on them. On the contrary, in my opinion this project will balance our interest, our involvement in this value added chain, which is perhaps to a greater extent on our Western partners side. But now, we can say that it would be some good balance in terms of cooperation and partnership in a global sense.

CORR.: You’ve mentioned trade, trade surplus and so on. But now we continue to interact so to speak within a dollar format. That is, the dollar still circulates between our countries. What are the prospects in your opinion for transferring, above all, to the yuan and maybe to the ruble in our payments?

Petr FRADKOV: It is not a new theme. You are absolutely right that this is one of key issues in the Russian-Chinese agenda in terms of strengthening trade ties. I believe that Vnesheconombank is a pioneer in transferring to cooperation in the ruble- yuan couple because we were among the first ones to enter into appropriate credit areements and they are valid. And we are quite experienced in raising among other things, financial resources in yuans and we might raise credit facilities in rubles in the future. So far, there are some limitations. Today, the yuan-ruble market is not large enough on the one hand, and on the other hand, we haven’t developed a mechanism for a fully functional mechanism for hedging currency risks and this is also one of the problems. Now the central banks of Russia and China have entered into a swap agreement. Unfortunately, this is a short-term agreement, it is valid only for a period of up to one year and applies only to trade transactions. We of course speak out in favor of spreading this swap between the national banks to investment transactions, and for longer periods of three or may be five years. In principle, some Chinese partners stand for a ten-year period. This in fact encourages investment cooperation. A volume of transactions also matters because so far this swap is limited to 150 billion yuans – this is not much.

CORR.: If we talk about Russia and China, we immediately start to think about BRICS. Vnesheconombank takes an active part in it. And they say that as early as in spring of 2016 the first projects might be examined. And a team to select these projects is to be formed from VEB’s professionals. What projects are you interested in most of all? How are they going to be selected? Are you interested in New Silk Road projects”.

It’s too early to speak about the New Development Bank’s (the BRICS Bank) operation as a financial institution. For the most part, it is now involved in establishing its internal procedures, so to speak, preparing business processes. But we are already working actively with a team of the New Development Bank. You are absolutely right – our colleagues from Vnesheconombank will participate in this Bank’s operation as employees. And we regard this Bank as our partner. The Bank’s President Mr. Kamath visited us several times. We held various talks with him and we know that his goal is to extend the first credit as early as in 2016. To my mind, now they are structuring their work and identifying main lines of their activity. These of course are going to be infrastructure assets, green economy, and projects associated with socio-economic development. The New Development Bank is a multilateral institution and it should support projects in which more than one country is interested - at least two and maybe more. Co-financing is very important in the BRICS’ Bank operation for national development institutions to participate in its activity. In the course of a recently held BRICS summit in the city of Ufa a Memorandum was signed between the New Development Bank and the BRICS Interbank Consortium. Vnesheconombank is a representative of Russia in this Interbank Consortium. National development banks are natural partners of the New Development Bank. Under this Memorandum, we are working on those projects that we would be ready to hand over to the BRICS Bank. We’ve got such a portfolio of pretty well-prepared and structured projects.

CORR.: As far as other projects are concerned, not long ago VEB and the China Development Bank signed a framework agreement on the joint support for the development of the Far East. The amount of investments is tremendous – 8 billion in dollar equivalent. How are you cooperating with the Chinese side on this issue?

Petr FRADKOV: I’d like to say that the China Development Bank has been our partner for many years. Since 2005, we have been enjoying good relations with CDB and have jointly implemented many projects. And we prepared and entered into an agreement with them on projects in the Far East. The agreement is worth 8 billion in dollar equivalent. It’s quite a different sum in yuans. In terms of receiving funding, we assume that for the most part it would be also in yuans for Chinese investors and companies to be interested in participating in projects in the Far East. I must say that the agreement was signed only in May so we haven’t conducted any transactions yet. Not long ago, we staged a sort of Road show in China. We engaged in it our subsidiary – the Far East Development Fund. There was a significant interest. I assume that even at a forthcoming Far Eastern Economic Forum some sort of documents (initiatives) could be signed on using these monetary resources.

CORR.: They even mentioned such sectors as communications technologies, agro-industrial complex.

Petr FRADKOV: You are absolutely right.

CORR.: That is to say, that this attitude remains.

Petr FRADKOV: These are perhaps the region’s priorities as a whole. We are coordinating our work with development institutions that are interested in developing the Far East. The region’s priorities include defense industrial complex, infrastructure and communications.

CORR.: Rounding up our interview devoted to your Bank’s cooperation with Chinese banks, we can also mention the Export-Import Bank of China. For the first time you raised funds from this bank in the national Chinese currency to finance the project. Could you tell us in more detail about this line of activity?

Petr FRADKOV: This must have been the first pilot project that we implemented jointly with the Eximbank of China. This must be our second vis-à-vis in China. The Eximbank of China is also a state bank with its mandate, its clear logic and interest. The Eximbank of China is designed to enhance cooperation between Chinese companies and the rest of the world, specifically with Russian business. We entered into an agreement with it. So far, I wouldn’t like to reveal details because of a certain list of conditions precedent. This is the first long-term credit agreement in Russia. I’d like to stress that it enables us to use yuans for more than seven years to fund a specific project on developing ore deposits.

CORR.: Summing up our today’s conversation about the new Silk Road Project I’d like to ask you a question: To what extent is it realistic to implement such a global project?

Petr FRADKOV: I believe that this is quite a realistic project, given the common interest in implementing it. To my mind, all the sides are interested in the project.

CORR.: Petr Mikhailovich, thank you very much for your interview.

Petr FRADKOV: Thank you.