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Published in Stream:
Russia Update: April 6, 2015
Press by
The Interpreter
@Interpreter_Mag
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
Interpreter_Mag
Rosneft May Tap Into National Welfare Fund for $1.6 Billion to Finance Zvezda Wharf Project; Oil Spill in Sakhalin
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Rosneft, the state oil company headed by Igor Sechin, requested as much as 89 billion rubles ($1.6 billion) from the National Welfare Fund (NWF) to build out the Zvezda wharf in Primorsky Territory in Russia's Far East, Kommersant and TASS reported.

On April 3, Vice Premier Arkady Dvorkovich said the Kremlin may support the request, although regarding other Rosneft requests there is "no final decision". The Zvezda project was attractive because it fit with the Russian government's plan of import replacement in the wake of Western sanctions and retaliatory boycotts from Moscow. Dvorkovich did not name a figure, but said the sums "were substantial." A source in the Ministry of the Economy told Kommersant that "only the first stage" is passed although "a positive conclusion had been sent regarding the strategic significance of the project."

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According to a Kommersant source familiar with the ship-building industry and close to Rosneft, the company wants to get 89 billion rubles ($1.6 billion). The total cost of the project has risen from 11 billion to 130-140 billion rubles and it is not clear if the entire sum requested will be received; under Russian law, the amount requested from the NWF cannot exceed 40% of the project. But sources also said this would be insufficient to fund the project due to the weak ruble and expensive loans.

Zvezda, a "super wharf," was begun in 2009 by the South Korean company DSME and was oriented toward getting offshore orders from Rosneft and Gazprom.

But DSME pulled out of the project in 2012, citing uncertainty from the partners, lack of funds and lack of a plan for orders. The consortium was turned over to Rosneft and Gazprombank in 2013, which were supposed to get 75% ownership of the Far East Ship-Building and Ship-Repair Center. But it failed to attract investment although it was expecting a loan from VEB bank of 100 billion rubles and an allocation from a state ship-building program of another 27.5 billion rubles. Putin criticized the project in November 2014 for failing to have a portfolio of orders through 2018 and ordered it to define its sources of financing in the near future. Vice Premier Dmitry Rozogin also criticized the pace of the project on March 25, 2015.

The application to the NWF was submitted a half year ago for a total of 1.5 trillion rubles for 16 projects. A government source told Kommersant that Rosneft can "realistically expect" financing only for the Zvezda project.

Nadezhda Malysheva of PortNews said the Zvezda project has to be finished because the gas companies need offshore technical capacity and if for no other reason "from the perspective of image." Thus a bloated project that even the president and premier have criticized may go forward just because of the political exigencies of the "import replacement" mandate and because otherwise "it looks bad."

Both Rosenft and Sechin personally are under Western sanctions and Putin has stated a number of times that companies hit by such sanctions would be helped by the government.

Meanwhile, there was news of a Rosneft-related oil spill today in Sakhalin, a province already facing the crisis of a sacked government and the arrest of the governor, and the fishing trawler disaster in which 56 fishermen lost their lives, likely due to the navigator's error.

Environmentalists at the Sakhalin Ecology Watch report an oil spill in Okhinsk District on the grounds of the Ekhabi Votstochnoye oil plant, a subsidiary of Rosneft.

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The spill was discovered March 31 although it had begun earlier. It is not clear if authorities have managed to bring it under control. 

Several thousand square meters of soil have been polluted by at least several tons of oil. Sakhalinmorneftegaz, a local marine oil and gas agency is trying to stop the leak but has not filed a report about it as it is obliged to do by law.

-- Catherine A. Fitzpatrick