Dmitry Medvedev gave the "Silk Road" to an old friend of Gazprom

Former top manager of the gas monopolist Alexander Ryazanov will build a private highway from China to Europe.
08.07.2019
Vedomosti
Origin source
The project of the first fully private motorway in Russia - the Meridian road (which Kazakhstan should connect China and Europe) - has long seemed an adventure: giant infrastructure projects are usually built under a contract with the government, otherwise how to attract investment and credit.

But now the project, and in private, received government support. Prime Minister Dmitry Medvedev approved Meridian as the federal route Europe - Western China, and this route is included in the comprehensive plan for the development and modernization of infrastructure. This is stated in the minutes of the meeting with the Prime Minister on June 24. A copy of the document was reviewed by Vedomosti, its authenticity was confirmed by the press secretary of the Prime Minister.

Medvedev instructed the officials of the Ministry of Transport and the Ministry of Economic Development to advise the project initiator, CJSC Russian Holding Company, in attracting investors, including from China; all necessary support for the project should be provided by the ministers of transport, construction, finance and economic development.

Motorways, similar to the "Meridian", have not yet been built in the modern history of the country: its length is almost 2000 km, it will pass from the border to the border, from Belarus to Kazakhstan, and should create the shortest route for moving goods between China and Europe.

The project initiators have already bought more than 80% of the land in the corridor of the future road, and they plan to start building the “Meridian” from the border with Kazakhstan: after the first stage, trucks can be started along the route, after which the goods will go along the regional A300; after the second stage, the cargo will be able to go to the full-fledged federal highway M4 "Don".

How to build without money

The private road is estimated at almost 600 billion rubles. (without VAT, in current year prices) and should be built without state money. For comparison: the construction of the Central Ring Road, 525 km long, is half funded from the National Welfare Fund.

But private builders have a condition: the state should provide them with a minimum guaranteed income of 35 billion rubles. a year, a federal official and a participant in government meetings told Vedomosti. The funds will be required if political risk is realized, that is, a situation arises that the investor cannot influence - for example, the state borders will be closed, explained the beneficiary of the Russian holding company Alexander Ryazanov. But commercial risks such a state guarantee will not cover.

Russia has never issued such political guarantees, Ryazanov continues, but the government is carefully considering the arguments of the initiators.

The government also discussed financial state guarantees, the amount of 200 billion rubles sounded in the spring, say the interlocutors. Now there is no question of a state guarantee that would cover financial risk, the project is good, Ryazanov asserts, and Leader Asset Management can manage the financing (manages the funds of the NPF and actively invests in infrastructure). A person close to the “Leader” reported that in the spring the Criminal Code informed the initiators of the project: state guarantees are desirable. The representative of the "Leader" did not respond to the request.

It’s unlikely that one lender will be able to take such a risk - a consortium is needed, CLS lawyer Dmitry Raev believes, and securing a loan will be key to bank financing. The guarantees have not yet been agreed, the representative of the Ministry of Finance remarks: the project is being structured, it’s too early to talk about the model.
All major road projects, even with maximum traffic (M11 Moscow-Petersburg, Western High-Speed ​​Diameter in St. Petersburg) required large non-returnable government investments, said PwC partner Mikhail Bazhenov.

For Meridian, where the share of debt financing is significant, the key will be a first-class guarantee, at least covering the return and the specified debt - with interest, commissions and sufficiency ratios, and operating costs, Bazhenov concludes.

Beat the competition

President Vladimir Putin also spoke about the need to build and reconstruct roads in the direction of China. “It was the Meridian highway that was implied,” the former federal official interprets. But the government is familiar with several route routes that would ensure the transit of goods from Europe to China. The Meridian itself is one of the options for the Europe-Western China transport corridor, you can build a new Moscow-Kazan highway, or have an idea to reconstruct the M7 highway with a bypass of major cities. All these routes, the presidential administration official explained, are considered to be competing.

Ryazanov expects to conclude with the government an agreement on the protection and promotion of investments (SZPK), according to which the authorities will not build and reconstruct roads in the same direction as Meridian, otherwise the route may lose traffic.

“Meridian” is a private project that can be implemented if the cargo base and extrabudgetary funding is confirmed, the representative of the Ministry of Transport said. At a meeting with Medvedev’s participation, Transport Minister Yevgeny Dietrich insisted on excluding Meridian from the trunk plan, because the investor had delayed the provision of the necessary documents, but Medvedev approved the project instead, the official said.

As before, the main project of the state company Avtodor remains - a new highway with the same infrastructural sense as Meridian, connecting Europe with Western China. The Avtodor project has even been included in the trunk plan, but the final decision that the route will be built by the government has not yet been made, although the deputy chairman of the government, Maxim Akimov, has instructed to prepare the draft territory planning for the highway.

The main road Europe - Western China requires substantial budget funding, said a participant in government meetings, and if Meridian received support, the chances for its construction are reduced. In addition, he continues, the construction and reconstruction of roads on the Europe-Western China route is estimated at 1 trillion rubles. against 600 billion on the "Meridian" with a comparable length. The cost of 1 km of the route is estimated by the initiators of Meridian at 300 million rubles. To some of the experts interviewed by Vedomosti, it seems to be understated, while others say it all depends on whether bridges, racks and engineering communications are included in this amount. The initiators of the “Meridian” may apply for state support later, when it becomes clear that the authorities will not have time to build other roads by the end of 2024, said a participant in government meetings.

By July 20, the Ministry of Economic Development, the Ministry of Finance, the Ministry of Transport and the Ministry of Construction should submit to the government a coordinated position: what are the costs, sources of funding, political and social risks of reconstructing the M7 Volga highway (another competing project. - Vedomosti), said in a copy of the minutes of the meeting have Medvedev. “This option is now being considered as an alternative to the new Moscow-Kazan highway,” said a participant in government meetings. The cost of the new route is comparable to the cost of reconstruction, a federal official knows.

But, most likely, the variant with the reconstruction of the M7 will be postponed, the federal official continues: The Ministry of Transport insists that reconstruction is possible only after the construction of the new Moscow-Kazan highway is completed, moreover, it will take more time than new construction. Speech about the largest transport artery of the country, explains a participant in government meetings, reconstruction and expansion may take six years, the route will have to be blocked - all this is fraught with a real political collapse.

How to pay back

To help recoup the "Meridian" could be payment obligations under the contracts - for example, in the event of a large strategy for the development of territories near the highway, says Rayev.

But the initiators of the "Meridian" are counting mainly to pay for the road, intercepting part of the container traffic of the Suez Canal - about 3.5%. According to Ryazanov, the expectation is that about 600 trucks a day will pass by the road. “It's a bit, the road will be almost empty,” admits Ryazanov.

Conceptually this is possible, but everything will depend on the ratio of time and cost of transportation, some of the goods, including perishable ones, can be reoriented to this route, said Alexander Knobel, director of the Institute for International Economics and Finance at the Academy of Foreign Trade. It is important that Russia and the Eurasian Economic Union as a whole move along the path of opening trade with the European Union, and not restrictions, he concludes.

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