MOSCOW: Russia and China signed economic deals and a financing agreement for up to $25 billion for Russian companies from Chinese banks, as Moscow looks to seal closer ties with its southeastern neighbor given its standoff with the West.
President Vladimir Putin and his Chinese counterpart Xi Jinping oversaw the signing of an agreement here allowing domestic companies to raise funding from Chinese banks against guarantees provided by Moscow, which is cut off from global capital markets by Western sanctions. The two countries also signed a preliminary deal for Russia to supply gas via a pipeline to China, although key details remain to be resolved, as well as agreements in aviation and farming.
“Today, China is our key strategic partner,” Mr. Putin said, seated alongside Mr. Xi as the deals were signed.
Mr. Xi is the highest-profile foreign leader in Moscow for Russia’s celebrations Saturday of the end of World War II. Western leaders aren’t attending the event after Russia’s annexation of Crimea and support for separatist militants in eastern Ukraine.
Facing Western economic sanctions, Moscow has touted a turn eastward, saying it would seek Asian investors to reduce reliance on Europe and the U.S. But results have been mixed. Russia was disappointed last year that Chinese and other Asian investors didn’t jump in to the void left by Western creditors. The financing deal, signed Friday by the Russian Direct Investment Fund, the Russia-China Investment Fund and China Construction Bank, appears to represent a typical example of China’s hard bargaining, leaving Russia bearing all the risk.
The agreement will allow Russian companies, struggling to repay foreign debts, to raise up to $25 billion in the next two to three years at lower costs than on the domestic market, the spokeswoman for RDIF said.
The state-run RDIF will provide around $1.5 billion to the financial partnership, co-financing future deals and acting as a warrantor in case of possible defaults.
“We will focus on companies that are not under formal sanctions but are having difficulties attracting money. We plan to help companies that as a result of the current geopolitical situation are experiencing problems attracting liquidity,” RDIF chief Kirill Dmitriev said in televised remarks.
“We see excellent opportunities with many Russian companies seeking debt financing from overseas markets, and it is of mutual interest to leverage the strong capital of Chinese banks and financial institutions, which have active plans to invest internationally,” Hu Bing, president of the Russia-China Investment Fund said in a statement.
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