The Guardian: View from Russia

The Guardian

September 6, 2007

By Jason Corcoran in Moscow


Public/private partnerships have become the great hope of the Russian government in the quest to regenerate the country's dilapidated Soviet-era infrastructure.

Investment in crumbling roads, railway, ports, utilities and municipal services, was a central theme of President Vladimir Putin's recent final state of the union address. Putin said public spending would not be the main source, but would act as a catalyst for private investment. "The state should put its shoulder to the wheel, in cases where the risk for private investors is too great."

Infrastructure investment has fallen short in recent years, despite growing oil revenues. The Kremlin is banking on private investors stumping up billions to finance 10 big projects, which have been seeded with money from the government's investment fund. According to investment bank Merrill Lynch, infrastructure spending in Russia will reach £90bn over the next three years.

Innokenty Ivanov, a senior lawyer at Freshfields Bruckhaus Deringer in Moscow, said a lot of the impetus for PPPs is coming from the regional and federal level level. "Putin has issued the clarion call but it's the regional governors, the minister for transport Igor Levitin and the minister of economic development and trade German Gref who have been hands on," said Ivanov, who is advising the federal government on PPPs.

The government is also discussing whether to set up a PPP unit to supervise the growing number of projects. For the first 10 infrastructure projects selected for tendering, the Ministry of Economic Trade and Development has set a target of £15bn for private money, a 20:1 ratio on the government's initial commitment of £750,000.

The £1.5bn western high-speed toll motorway encircling St Petersburg is to be the first project, with the winning consortium and the new law on concession agreements due to be announced this autumn. The eight-lane highway stretching over 33 miles, with 13 bridges and a viaduct, will take an estimated six years to construct.

Government financing is in place for further works in St Petersburg such as the Orlovsky tunnel under the Neva River, a high-speed elevated railway and £3.5bn toll road linking up with Moscow. Other major PPPs include a road link to the Moscow-Minsk highway, an oil-refinery complex in Tatarstan, an energy-industrial complex on the Angara river and reconstruction of sewerage plants in Rostov-na-Danu.

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