Germany boosts ties with Russia by $ 7 bn

Jul 09, 2004 02:00 AM

Apparently unfazed by the banking and Yukos crises gripping the investment community, an cheerful President Vladimir Putin personally greeted German Chancellor Gerhard Schroeder at Vnukovo Airport before whisking him off to the Kremlin to preside over the unveiling of EUR 6 bn worth of bilateral business deals.
Putin sought to portray the meeting as a sign that all was fine with the Russian economy, while Schroeder, in Moscow with a German business delegation, said that confidence in stability in Russia was "quite high," and downplayed the Yukos affair as "an internal Russian affair."
"Our meeting today should give a good signal to the economy," Putin said. "The most convincing investment signal is the current macroeconomic situation in Russia."

About 30 executives from Lufthansa, Deutsche Bank, Siemens and other leading German companies joined the two leaders in the Kremlin. Although some of the companies have loaned money to Yukos, the troubled oil major was not mentioned directly at the meeting.
"I think this reform activity has led to... trust in business circles in Germany regarding the economic stability and the political stability in Russia [being] quite high," Schroeder said. "I am stressing this all the time because there are discussions sometimes that say otherwise."

On the flight to Moscow, Schroeder had said the Yukos case did not pose a threat to German-Russian business relations.
"I can understand that a government that has a right to collect tax also wants to collect it," he said. "It's an internal Russian affair. There's no lack of confidence between German and Russian companies."
Putin and Schroeder pledged further collaboration in energy and other sectors, releasing a joint statement welcoming a $ 3 bn deal between Gazprom and E.ON to build a gas pipeline across the Baltic Sea. E.ON, Western Europe's second-largest energy group, acquired a 6.4 % stake in Gazprom through its purchase of Ruhrgas last year.
"We indeed plan to cooperate on pipeline construction," said Gazprom's spokesman Sergei Kupriyanov. The deal was worth $ 3.1 bn.

Gazprom wants to increase gas supplies to Europe by at least 50 % over the next decade. The projected Baltic Sea pipeline to Germany would cut Gazprom's dependence on routes via Ukraine and Belarus. The pipeline would carry up to 35 bn cmpy of gas and may have possible branches to Finland, Sweden and Britain. Dutch gas firm Gasunie, Shell, BP, France's Total and Finland's Fortum have also shown interest in the pipeline, estimated to cost a total of $ 5.7 bn.
"Development of Russia's resources and expansion of the gas infrastructure holds key importance to meeting additional natural gas demand and for providing stability and security to the gas supply of Germany and the whole of Europe," the statement issued by Putin and Schroeder said.
Schroeder also urged greater cooperation between the two countries in aviation, pharmaceuticals, biotechnology, banking and the service sector.
"Russia must concentrate on developing sectors outside of natural resources," Schroeder said.

A retail joint venture deal was announced at the meeting with the creation of Billa Russia, a $ 618 mm supermarket chain 75 % owned by Rewe Handelsgruppe, a German grocery retailer, and 25 % owned by Russia's Marta Group.
About 20 Billa supermarkets will open in and around Moscow by the end of this year. Electronics and telecom giant Siemens and Russia's Sistema announced a new partnership agreement at the Kremlin meeting, extending a 1999 agreement.
The two countries plan to continue business talks September in Hamburg, Germany.

Source: The Moscow Times
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