Agreement non-binding nature: why Vladimir Putin goes to China

Russian President Vladimir Putin and Chinese President XI Jinping during a meeting in Beijing, September 2015

One of the important documents that might be signed during the visit is the agreement on financing the construction of high-speed highway Moscow-Kazan, told RBC a source close to RZD, and confirmed the Federal official. According to the first source, early in the week, the transport Ministry sent for approval to other departments the draft agreement. “In the last few days all the work [with the agreement on financing of the CSM] with great speed,” adds the interlocutor of RBC familiar with the course of the project. The Chinese side should be allocated for the construction of high speed railway of more than 500 billion roubles, including 400 billion will give credit China Development Bank, and more than 100 bln Silk Road Fund. The latter will make a capital contribution to the special project company (SPC) created for the financing, construction and operation of the future highway. “The main parameters of the agreements have been approved by the Chinese back in may,” says the source of RBC familiar with the project conditions.

One of the contentious issues remained the state guarantees on the loan from Russia, which had originally expected China Development Bank. At the beginning of June the first Vice-President of Russian Railways Alexander Misharin said that such guarantees will not. Instead, the parties agreed on a subsidy that the SEC will receive from the budget in the case that ridership will be less than expected and the project will not reach self-sufficiency. This subsidy will allow you to repay the loan, therefore, China Development Bank, essentially, no risk, says a source familiar with the negotiations. On the minimum return guarantees as an alternative to state guarantees and says the interlocutor of RBC, close to the Railways. However, a source close to the Russian delegation told RBC that due to the lack of safeguards agreement generally may not sign. The total cost of construction of the highway is 1.2 trillion roubles, approximately 640 billion RUB may reach the size of state subsidies to the documents at the disposal of RBC.

According to official information, the Russian delegation will include officials of the presidential administration and the government as well as business representatives. Among them, the head of the presidential administration Sergei Ivanov, Deputy Prime Minister Olga Golodets, Dmitry Rogozin, Igor Shuvalov, Arkady Dvorkovich and Yuri Trutnev, the Minister of economic development Alexei Ulyukayev, Minister of agriculture Alexander Tkachev, Minister of industry Denis Manturov, energy Minister Alexander Novak, the head of RDIF Kirill Dmitriev. Putin will also accompany the head of “Rosneft” Igor Sechin, the Chairman of the Board “Gazprom” Alexey Miller, the owner of the investment group Volga Group Gennady Timchenko. The delegation will also be the Chairman of the Board and co-owner of NOVATEK Leonid Mikhelson, told RBC close to the participants of the delegation source

Gazprom and CNPC

Another important document may be a Memorandum on cooperation between “Gazprom” and Chinese CNPC, which the parties also plan to sign during Putin’s visit. As has told to the newspaper “Vedomosti”, the representative of CNPC, we are talking about a framework agreement involving the construction of underground gas storage and gas generation. The official representative of “Gazprom” Sergei Kupriyanov confirmed RBC that in the course of Putin’s visit to China, the company plans to conclude agreements for the construction of underground gas storage and electricity.

Predpravleniya “Gazprom” Alexey Miller and the head of CNPC Wang Yilin at the end of may held a meeting in Sochi, where they also discussed prospects of cooperation in construction of underground gas storage, gas generation, and fuel supplies through the pipeline “Power of Siberia”. In addition, CNPC — one of applicants for participation in the upcoming privatization of 19.5% of “Rosneft”, said the Chairman of its Board of Directors Wang Yilin at the end of may. Sechin June 21, said he supports participation in the privatization of strategic investors, but stressed that they must bring the company synergy. Presidential aide Yuri Ushakov found it difficult to specify, will discuss the participation of Chinese partners in the privatization of “Rosneft”.

In the course of the visit will be formilitary agreement for the provision of loans of Chinese banks about $12 billion Yamal LNG project of NOVATEK for the construction of a plant for the liquefaction of natural gas on the Yamal Peninsula. Relevant agreements with Chinese banks NOVATEK signed at the end of April. During the visit, Yamal LNG, may get the first tranche of these loans, adds another source close to the Russian delegation.

To negotiate with China

It is planned the signing of about three dozen documents. “For the most part non-binding agreement, plus two or three “political project” of the Ministry of foreign Affairs,” — said the interlocutor of RBC in the delegation.

“Some agreements are non-binding in nature, but have great political significance,” says another source from the Russian delegation. In particular, he cites the example of a Memorandum of cooperation between Russia and China on the harmonization of the actions of the two countries in international organizations, which may be signed during the presidential visit. We are talking about interaction of Russia and China in the WTO, the G20, the world customs organization and primary unions, which include the two countries.

Russian Ambassador in China Andrei Denisov said that during the visit Putin will discuss the issue of exploitation of tourism resources of the North Caucasus. The source of RBC in “Business Russia” says that in may, the head of the Ministry for North Caucasus Affairs Lev Kuznetsov at a meeting with representatives of the business organizations stated the need to attract investment in tourism infrastructure in the region, including foreign. He did not rule out that it is possible to attract the funds of Chinese investors, says a source. We are talking mainly about investment in the transport and logistics sector and the tourism industry, said RBC representative of the Ministry. We have already achieved agreements on cooperation between the JSC “resorts of the North Caucasus” with the Chinese real estate development holding company Beijing Urban Construction Group to participate in the development of the resort “Arkhyz” in Karachay-Cherkessia is now discussed terms of cooperation, he said.

In January 2016, the Kabardino-Balkar company ETANA has signed a contract with two companies belonging to the CNPC, the construction of industrial complex for production polietilentereftalat. It is planned to use modern technologies of China in the framework of the creation on the territory of the North Caucasus Federal district joint production of building materials, renewable energy and agricultural processing. Also recently a Chinese company “Hua Sheng” declared intention to create the first in Ingushetia in the North Caucasus enterprise for growing mushrooms, — is spoken in the comment of the press service of Minkowksi.