VTB will provide 1 trillion rubles for projects in the Arctic

27.11.2019

VTB will provide 1 trillion rubles for projects in the Arctic

VTB is going to increase the amount of credit means allocated for the development of the Arctic to 1 trillion rubles in the next two years, deputy chairman of the bank Valery Lukyanenko said. Moreover, the total volume of investment projects in the Arctic zone is more than 10 trillion rubles. So, VTB is ready to provide 10% of this amount.

According to Lukyanenko, the current volume of “risks” of VTB related to projects in the Arctic is 400 billion rubles in the form of loans and 100 billion rubles in the form of guarantees, and bank is going to double it by 2020-2021.
 
Money for icebreakers

In particular, VTB is going to provide “Rosatom” about 150 billion rubles for the construction of three «Leader» icebreakers, as well as about 45 billion rubles on two universal nuclear icebreakers LK-60.

The Leader with a capacity of 120 MW is needed by Rosatom to organize year-round navigation along the Northern Sea Route: this icebreaker is able to pass ice up to four meters thick, providing commercial speed for cargo delivery. Now the period of navigation along the Northern Sea Route (NSR) in the eastern direction lasts only two to six months a year due to ice.

It is planned to build the Leader at the Zvezda shipbuilding complex, the first icebreaker will be financed from the budget: 60 billion rubles will be allocated for it in 2020–2022. Rosatom decided to enter a new shipping business for itself and become one of the 15 largest shipping carriers in the world by transporting goods from Southeast Asia to Europe via the NSR, intercepting part of the cargo from the southern route.

The representative of Rosatom did not comment on Lukyanenko’s statement, recalling only that the state corporation is negotiating with banks to finance serial icebreakers LK-60. A cooperation agreement for the implementation of Arctic projects between VTB and Rosatom was concluded at the St. Petersburg International Economic Forum in June 2019. But the final decision was not made - Rosatom is going to hold a tender between the banks.
 
Rosatom estimates investment in creating the necessary transit infrastructure on the Northern Sea Route at 7 billion dollars. The annual turnover of the new carrier is estimated at 5.6 billion dollars at its peak. A pilot launch of the container line on the Northern Sea Route is planned for 2024; its capacity is estimated at 30 million tons per year by 2028. To transport the target volume of container cargo via the NSR, an Arctic fleet of 33 commercial vessels will be required; the state corporation estimates investments in the creation of fleet at 5.8 billion dollars. To finance the project, they are going to attract project financing and co-investors.

The Deputy Minister for the Development of the Far East and the Arctic Alexander Krutikov said that the government intended to create a state-owned container cargo operator in the Arctic and cover transportation costs for carriers, as well as all the risks associated with it. This project is being developed by the Ministry for the Development of the Russian Far East together with the energy center of the Skolkovo business school. Now transporting goods through the Arctic costs one third more than transporting them through the Suez Canal, despite the fact that the route through the Arctic, connecting Europe and Asia, is much shorter than the south one. The length of the NSR from St. Petersburg to Vladivostok is about 14 thousand km, while the path between these cities along the route through Suez will be more than 23 thousand km.

In a May decree, President Vladimir Putin set the task of developing the NSR by increasing its cargo traffic four times - up to 80 million tons by 2024.
 
Other projects in the Arctic

In addition to the icebreakers, VTB is going to allocate funds for an investment project to develop the Baimskoye copper-gold field in Chukotka.

According to Alexander Kozlov, head of the Ministry for the Development of the Russian Far East, the volume of investments in the development of the Baimskoye field will amount to 268 billion rubles; about 100 billion rubles will be spent on infrastructure. The project involves the construction of an enrichment plant and the entire infrastructure necessary for its functioning.

There are no concrete decisions on financing the Baimskoye field yet, Lukyanenko specified. “About 30 billion rubles are planned to be allocated from the budget for the creation of infrastructure. The possible amount of VTB participation will be determined jointly with the government of Chukotka in the subsequent stages of the project», — he explained.

VTB is negotiating financing of platinoid mining in Taimyr - the «Arctic Palladium» project of Norilsk Nickel by Vladimir Potanin and «Russian Platinum» by Musa Bazhaev. As Bazhaev recently said at a meeting with Putin, «Russian Platinum» with VTB and RDIF were working to attract Middle Eastern partners in this project». In February 2018, Bazhaev and Potanin agreed to create an Arctic Palladium joint venture on a parity basis, in which the owner of Russian Platinum contributed Norilsk-1 and the Chernogorskoye field, and Norilsk Nickel - the Maslovskoye field. The reserves of these three sites located in Taimyr are estimated at 4.5 thousand tons, and investment in the project - at 15 billion dollars.


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