The first section of the Moscow – St. Petersburg motorway (km 15-58) is widely heralded as being the first public-private partnership (PPP) in the roads sector in Russia. Yet surprisingly little is known about the private sector concession-holder for the project – the North West Concession Company – considering that this is a company to which the Russian government and road users will pay EUR 1.5 billion [1] over the course of the 30- year contract.
The Russian media has widely reported the involvement of French construction giant Vinci and the Russian group N-Trans. Mention has also been made of Arkady Rotenberg, reportedly a friend of Prime Minister Putin, but without specifying his exact involvement. This fact alone – that a public-private partnership is planned with a company whose constituent parts cannot be established from freely available public sources – rings clear alarm bells.
A closer examination of the the North West Concession Company involved reveals a complex web of offshore entities ending in the British Virgin Islands, and confirms the involvement of Arkady Rotenberg. As the British Virgin Islands legislation allows companies registered there to keep their shareholders secret, it is clear that these complex set-ups are aimed at hiding the true beneficiaries of NWCC's lucrative contract. The role of N-Trans and its billionaire owners remains unclear.
Further questions are raised by Vinci's side of the story and the involvement of the Lebanese/Syrian/French- backed Vosstran Invest SA. Why did a large and experienced company like Vinci need to get an unknown company like Vosstran involved? What are the interests of the people behind Vosstran? Do they have relevant experience for a project like this?
A new agreement with the NWCC is due to be signed in May but the Russian public deserves answers to these and many more questions before the project goes any further. The Russian government must disclose the existing concession agreement and re-examine the project if this project is to bring benefits to anyone other than the company owners. PPPs are gaining a reputation across Europe as being overpriced and transferring high profits to the private sector while the public sector ultimately retains most of the risks [2]. If this model is to be more successfully applied in Russia and avoid the problems that have arisen in other countries, it is crucial to get it right from the very beginning.
That the European public banks – the European Bank for Reconstruction and Development and the European Investment Bank – ever considered financing such an opaque project is astounding. While the European Bank for Reconstruction and Development is not currently involved in the project, and the project appraisal process at the European Investment Bank is also not proceeding, in the future they need to step up their project appraisal to screen out such un-transparent projects at a much earlier stage. Those banks which remain involved in the project – Sberbank and Vnesheconombank – likewise need to re-assess the risk they are taking on by financing an untraceable structure.
[1]: European Investment Bank project document, 11.11.2009
[2]: See for example CEE Bankwatch Network: Never mind the balance sheet: the dangers of public-private partnerships in central and eastern Europe, November 2008
