Without illusions: China turns Russia into a raw materials appendage

Why you should not believe the optimistic stories in the Russian media about foreign investment in the Russian economy

A very interesting analysis of what is actually happening in relations between Russia and China has done in his blog, economist Dennis Suchilin. “Novye Izvestiya” publishes this material with small reductions:

I have repeatedly raised the issue features the “management” of private funds by people who are, say, a set of economic [primarily] the motion vector of our country [and the world]. One of the principles followed by these people, is the principle [let’s call it roughly] “money attracts money”.

In this case, this phrase means not that we used under it to see (if you have the money, then they “stick” yet; and those who have no money, they won’t appear), but what really stands behind this phrase — we cannot allow the “poor” people money. This formula is the basis of the formation of the largest capitals in the world (in other words, this is the whole economic world). And the word “poor” here has a slightly broader meaning — rather: not like “we” (owners of capital).

One of the recent examples I cited, when we raised the subject, was the following: the owner of a large capital was willing to lose tens of millions (endure theft on the part of such [non-equity] to him), but was not ready to give 0.5% of this amount, the average person who might this process to stop. Of the readers who had the opportunity to directly (or near) to work with Russian characters Forbes, he understands what I’m talking about. In Russian politics it is especially good noticeably in recent years: its — everything else — nothing (sometimes they also say: the rest of the law).

As an international example of the most obvious to a broad group of users of the network can distinguish the example of billionaire Jeff Bezos, the main shareholder of Amazon. Recently, he also began to talk about what portion of funds will give to charity — we are talking about tens of billions of dollars. While there is no question about how to improve the lives of your workers who complain on the network in difficult working conditions and low pay for such work.

We will not delve into this narrow subject (who need to be able to dial in Yandex “the complaints of employees of Amazon” and the first link to take in the situation), it is important to understand one thing: all these people from Forbes say beautiful words about charity, about what the lives of ordinary people should be improved, and at the same time behind these people slave labor of thousands of employees and the tragedy of their families. How many crippled destinies is standing behind the Russian participants of Forbes, it’s easy to understand scoring in the Yandex search phrase “how to live the miners” or “ecology in mining“.

Worldwide are all the same: the man (team) standing on the social ladder above says beautiful words, and just enjoys the more weak — does not help, but it uses it, instead of giving him promises and a minimum of resources for survival and continue working.

This applies to all levels of relationships in the world. An extra penny to the one who is below, or is not “her”, never will. This rule is followed strictly. Only thus is formed and has a large capital.

If this situation is to consider inter-state relations and look at the chain of “Russia — China”, then it becomes even more obvious.

In national media we are constantly told: “Well, again, the West does not want us to communicate normally, we turn to the East. China is our best friend“.

Let’s look at China. Lately we only hear about numbers in the hundreds of billions of dollars when we are talking about investment, loans or investments in the Chinese economy (here, the numbers have already crossed the one trillion dollars). Even our Central Bank moved almost $ 100 billion of gold reserves in the assets in Chinese yuan. What meets China?

Let’s roll back and look at the overall results, the recent SPIEF. “Kommersant” writes about “a Grand success” and a record for Russia, volumes of concluded agreements:

From 6 to 8 June was held on 23-th St. Petersburg international economic forum (SPIEF-2019). It was attended by a record number of guests — 19 thousand people from 145 countries of the world. The largest delegations began Chinese and American. It was also concluded a record number of transactions — 650 agreements in the amount of 3.1 trillion rubles. Major transactions and statements of the participants:

• The Rambler Group and Sberbank signed the agreement on operational cooperation.
• VEB, Sberbank and Gazprombank will Finance about $1.7 billion project of Acron group.
• “Gazprom Neft” and NOVATEK have signed an agreement to establish a joint venture for exploration and production of oil and gas in the Arctic.
• LUKOIL has acquired over $800 million from the New Age 25% in the project on the shelf in the Republic of Congo.
• OMV will pay to “Gazprom” €905 million for a stake in the Achimov deposits.
• CBT for 15 years, will invest in the creation of a system of labeling of 220 billion rubles.
• Xiaomi and Mastercard have signed a cooperation agreement, in which Russia will be available to payment service Pay Mi.
• Gazprom Neft and Shell will form a joint venture for the development of fields in Yamal on the basis of “Meretoyakhaneftegas”.
• Yandex Mail.ru, Rambler, “Kinopoisk” and copyright holders — the leading media houses of the country concluded at the site of Roskomnadzor Memorandum on cooperation in combating the spread of pirated content.
• “Gazprom Neft” has signed an agreement with “Sovcomflot” on filling ships with liquefied natural gas.
• “Gazprom Neft” has signed with Shell and Repsol agreement of intent to establish a joint venture for the development of undiscovered Liskinskogo and Pohutakawa plots for Gydane.
• Gazprombank and “House.Of the Russian Federation” have agreed to issue mortgage bonds in the amount of 350 billion rubles in 2020-2021 years.
• Gazprombank will provide more than 30 billion rubles. the State transport leasing company for the project of the port of Lavna.
• NOVATEK and Chinese CNOOC signed a contract for the sale of the share of 10% in the project “Arctic LNG-2”, which is planned to start in 2023. A similar agreement on the same share was also signed with China’s CNPC.
• The Ministry has signed Speke with Russian carmaker Sollers. The project involves the development of the model range of UAZ vehicles. Investment will amount to RUB 7.5 billion over 10 years.
• Under control to Gazprombank “REP holding” and the Italian Ansaldo Energia create a joint venture to manufacture and service gas turbines from 70 to 340 MW.
• MTS has signed with the government of Moscow the agreement on developing 5G in the amount of 20 billion rubles.
• VTB became the owner of a controlling stake in the company “Myrogroup resources”, which is among the ten largest exporters of grain.
• Ford has fully repaid the loan, “VEB.Russia” joint-venture Ford Sollers in the amount of 39.5 billion rubles, and sells the plant in Vsevolozhsk.

 

The schedule is especially beautiful. But if you look closely, you will see that most of the transactions and, accordingly, amounts are investments of the Russian public and parapublic companies. Foreign companies willing to invest only in acquisition of raw materials and, at best, to sign the agreement, in which the main is the question: whether it comes before the deal?

Here’s to you and success. Against this background, the meeting with the Chinese leader and rousing speech about the development of Majstorovic relationship look ridiculous. Wants China to invest in Russia? Of course he does. China:

• wants to buy our resources (oil, gas, coal …), gotopage in debt for many years to come ;
• wants to purchase the land on long term lease.

(…)

• wants to cut our wood, almost anything for it without paying (read on the latest conflict in the Krasnoyarsk region — it is clear that there is a struggle for the Governor’s seat, state contracts, etc., but in General it’s part of the work: forest officially brought in 50 billion rubles, and taxes paid a little more than 1 billion rubles, and this is talking only about the official export, and that there is, in reality, we can only guess is the link on Youtube;
• wants to gradually assimilate close to his territory:

… last year in the Primorsky branch of the savings Bank customers have purchased yuan, 29% more than in 2017. In Sakhalin and in the Amur region — more on 11-11,4%. In the Khabarovsk region purchase of cash of RMB increased by 13%. The Bank “Primorye” also notes the increase in the volume sold of the yuan by 20%.

Interestingly, at the end of last year, the credit institution also launched the first acquiring Alipay in the far East. Is already connected to trade network “Nevada Group” minimarkets “Razdva” and hypermarkets “Samberi”, presented in the Khabarovsk, Primorye, Kamchatka territories, Amur and Jewish Autonomous regions. As explained in the trading network “Samberi”, this service is often used by Chinese tourists and the number of transactions in the system increases.

Managing projects in Primorsky Krai Aleksandr Vyalkov says that from 2017, the Bank makes its ATM and POS-terminal networks, card China Union Pay.

In July of this year in trade and service outlets where established terminals of VTB, it is possible to pay the mobile Pay system Huawei for card holders of China Union Pay and mobile phone or Huawei Honor.

Today 100% terminal and self-service devices of Sberbank in the far East served by Union Pay card. As noted in the credit institutions, the bulk of transactions on cards with Union Pay in Russia is dominated by tourists coming from China and other Asia-Pacific countries. For example, for 2018, the year through the terminals of the far Eastern Sberbank held more than 218 thousand operations. The most active respecialisation cards in the Primorsky and Khabarovsk territories and the Amur region (s)

And investing in these areas tens of billions of dollars. But it’s not investment in Russia, investment in raw materials, and their “plantation”. At best China acquires a stake that allows him economically / legally to influence all decisions. All key projects (highways, Railways …), which actually needs to be investment in the Russian side, sabotaging China, shifting the costs to us.

(…)

For the sake of objectivity it should say that China is not only feeding off our resources, use our land, gradually drawing in on us, building in the economy, as plantation / the raw colony, and making us more dependent on [five years from now — in the full sense] largest economy in the world, for the sake of decency (to “justify” people to sell the Russian officials and make assimilation less obvious and visible) shows and real investments in the Russian economy:

Chinese automaker Great Wall Motor started car production at new Russian plant of full cycle in the Tula region with capacity of 80,000 cars a year, reported the Ministry of industry and trade of the Russian Federation on Wednesday. The company started to build a factory full cycle in 2015, the total investment will reach $500 million, the second phase project capacity should reach 150,000 cars a year, the report said Great Wall (C) Reuters

Again — funny $ 0.5 billion over 5 years. And now against the background described in the first part of the recording of hundreds of billions of dollars of Chinese investment rate the size of capital investment (real direct, evidence of real interest in the development) of China in the Russian economy:

[Net] China’s investment in the capital fell from 1.9 billion USD to 1.1 billion dollars. Again, only $ 1.1 billion — is the real net interest of China in development of “partnerships” and faith in the Russian economy.

And now, once again ask the question: partner we, China or just a group of people standing between the huge economic aggressive machine and geographic area with more resources? We want “the way East”?

Now re-read the first six paragraphs of this entry.

P. S. you Know what’s interesting. 2017 net direct investment in Russia for the year increased by 11% (about 52 billion USD). And for 2018, as you can see from the graph above, fell by 6.2% (minus 33 billion dollars). If you look at the list of countries (on the left in the table above), you will realize that the main disadvantage shown by Cyprus, Singapore and other offshore and near zones. I want to hope that they all ran to re-register in the Russian offshore in island or Russian in Kaliningrad, but something tells me that just and Russian officials (and their close friends, who are behind all these offshore and non-residents aware in advance of events 2023-2024 years (here and here) all “investment attractiveness” of Russian “market” and comfortable out.”

 

 

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