Reuters Edge

Putin China visit to bring $5.5 billion in deals

MOSCOW (Reuters) - Russian firms plan to sign over $5.5 billion worth of deals with their Chinese partners during the visit of Prime Minister Vladimir Putin to Beijing next week, Putin’s deputy told Reuters in an interview.

The 34 deals will range from a $500 million loan agreement between China’s Development Bank and its Russian equivalent VEB to joint projects in transport, infrastructure, construction and mineral extraction, a draft list obtained by Reuters showed.

Russia’s trade with China soared to $56 billion in 2008 from $9.3 billion in 2002. The share of oil in Russia’s exports stands at 56 percent, metals at 5 percent while the share of machinery stands at 4.4 percent.

“We cannot be satisfied. Unfortunately the share of machinery and equipment in our exports is too low, although it has recently started growing again,” Deputy Prime Minister Alexander Zhukov told Reuters late on Wednesday.

The list also showed Russia's diversified holding Sistema SSAq.L will sign a $200 million funding deal with the Bank of China 3988.HK and telecoms equipment maker ZTE Corp 0763.HK.

China National Materials (Sinoma) 1893.HK and investment holding company CNBM 3323.HK will sign four cement production facilities construction deals with Russian cement maker Eurocement.

Zhukov, who chairs Russia-China government commission and oversees preparations for the visit, said Russia pinned its hopes on future exports of commercial jets as well as equipment for nuclear power plants to boost machinery exports.

Latest data shows a 12.5 percent rise in machinery exports from Russia to China in January-July 2009, largely due to a 3.5-fold increase in aviation exports.

Putin, who stepped down as President in 2008 but remains Russia’s most influential politician, last met his Chinese counterpart Wen Jiabao in Davos earlier this year where both addressed the business elite on the global economic crisis.

Last year Putin and Wen Jiabao oversaw the signing of a pipeline deal with China to create a new overland supply route for Siberian oil and negotiated an oil-for-loan deal through which China secured Russian oil supply for the next 20 years and Russian companies borrowed $25 billion from China at low rates.


Zhukov said the two sides will continue the energy dialog, including talks about cooperation in the coal industry. He said Russia has also agreed to resume electricity exports to China.

Zhukov said the bilateral banking commission, headed by senior central bankers, will discuss raising the share of the rouble and the yuan in bilateral trade where the two currencies currently account for just over 1 percent of the trade turnover.

“Both us and the Chinese are interested in expanding this share. This is cheaper than settling trade in global currencies,” Zhukov said. “If businessmen see it is convenient they will use this possibility more and more.”

He said the two countries have not yet set targets for the share of trade to be done in national currencies.

Zhukov said Putin and Wen will also sign an agreement obliging the two countries to warn each other about upcoming ballistic missile launches as well as agreements on cross-border migration.

Zhukov said the two sides achieved “a real breakthrough” in customs regulation talks after the controversial closure of Moscow’s Cherkizovsky market where Chinese traders sold goods allegedly smuggled into Russia.

“This situation did not please neither us nor the Chinese. We lose customs fees. The Chinese find themselves in situations when they cannot proof their ownership rights. The task is to make Chinese exports to Russia transparent,” Zhukov said.

“The discrepancy between our and Chinese statistical data amounted to billions of dollars. Now this gap is shrinking. Ideally our data should match,” he said.

Writing by Gleb Bryanski; Editing by Andy Bruce