Newsletter for the Turkish businesses and investors (Issue 1, 2014)
New investment opportunities for Turkey and Russia
On 21-22 November 2013, Turkish Prime Minister Recep Tayyip Erdogan made an official visit to Russia. As a result, Turkey and Russia agreed to expand economic cooperation, and to promote further business interactions between Turkish and Russian entrepreneurs.
According to Turkish Confederation of Businessmen and Industries (TUSCON), the total current trade turnover between these two countries amounts to US$ 35 billion. Turkey and Russia have promised to collaborate to raise this amount to US$ 100 billion by 2015, irrespective of the widespread economic slowdown all around the world.
At the end of their talks, Prime Minister Recep Tayyip Erdogan and President Vladimir Putin designated the energy sector as a new area of Russian-Turkish partnership.
Russia highly appreciates that Turkey implements numerous investment projects in infrastructure and construction. The total Turkish investment contribution in Russia amounts to US$ 50 billion, which can be taken as evidence of an advanced level of partnership. Investors from both countries enjoy a wide range of business opportunities in newly opened industries, such as tourism, textiles, clothing, and construction. Moreover, Turkey wishes to attract Russian-qualified specialists in the energy sector, as the country plans to execute a number of infrastructure projects on an unprecedented scale for the 100th anniversary of the Republic of Turkey in 2023.
In turn, Turkish firms take an active part in Russian construction market, such as in the construction of sports facilities in Sochi.
Licensing procedures proposed for foreign legal entities and enterprises with foreign interests engaged in real estate transactions in Russia
The Ministry of Economic Development of the Russian Federation has drafted a Federal Law to restrict the formation of foreign enclaves in Russia.
Licensing arrangements will be required for transactions in which an ownership or accommodation right to real property is either created or conveyed for or to foreign individuals, legal entities, unrecognized foreign associations (i.e., organizations that are not recognized as legal entities), stateless individuals, and Russian legal entities with foreign interest of more than 50% (regardless of whether the right to real property is acquired or disposed).
The draft law enumerates the transactions that would require a license supplemented by the Russian Government:
- transactions implemented pursuant to international treaties and obligations of the Russian Federation
- transactions subject to state registration of aircraft and sea craft, inland vessels, and spacecraft
- transactions for the gratuitous acquisition of rights to real property
- transactions to establish encumbrances in relation to real property
- transactions relating to the investment of foreign investors or a group of persons in the form of acquisitions of shares (or other indicia of ownership interest), as well as the execution of other transactions that result in foreign investors or a group of persons obtaining the right of control over enterprises
Under the proposed legislation, the government of the Russian Federation would approve a list of Russian regions and foreign countries that will be immune from the application of such restrictions.
Turkish companies able to conclude contracts to support construction of the Akkuyu nuclear power plant
On 24 December 2013, the first forum on issues concerning local participation in the execution of the nuclear power generation projects in Turkey was held at the Istanbul Chamber of Commerce. The Deputy Minister of Energy and Natural Resources of Turkey, Ilker Sert, visited the forum. Dmitry Pokidyshev, who is the lead technical and licensing coordinator of the Akkuyu project, represented Akkuyu at the meeting. Representatives from the International Atomic Energy Agency (IAEA) CJSC Atomstroyexport, and Istanbul Technical University also participated.
The total amount of construction investment on nuclear power plants in Turkey is US$ 66 billion. A major part of this investment is focused on the Akkuyu nuclear project, which not only involves construction, but also is a wide-ranging investment project that will eventually enable Turkey to end its dependence on foreign energy.
The Akkuyu nuclear power plant is the nuclear generation station developed as a Russian project on the southern coast of Turkey. The agreement for construction of the power station was signed in May 2010. Exploratory engineering works began in 2011 in cooperation with Turkey, Rosatom, and the IAEA.
The Ministry of Energy and Natural Resources of Turkey will support Turkish businessmen who wish to contribute to nuclear energy projects. The basic concepts of the Turkish government's energy policy are the drive for energy diversity, the maximum use of internal Turkish energy sources, the liberalization of the energy market, and the improvement of energy efficiency.
Dmitry Pokidyshev informed the participants of the forum about the equipment procurement and the possibilities for the Republic of Turkey to participate in its implementation. Turkish companies will also render various services. According to the current plan, the first tender for procurement will be held in March, 2014. Information about the tender is on official websites of Akkuyu (http://www.akkunpp.com/index.php?lang=tr) and Rosatom (http://www.rosatom.ru/en/).
Avtodor extends deadlines for Central Ring Road project in the Moscow region
The Russian state road-building company, Avtodor, has extended, from 3 December 2013 to 10 April 2014, the filing deadline for proposals from participants in the tender for a long-term investment agreement for the construction and operation of the first construction stage of the Central Ring Road (CRR) in the Moscow region.
The successful bidder will be enter into a long-term investment agreement, which provides for the construction and operation of 49.5 km of the CRR through the Domodedovo urban district, the Podolsk and Naro-Fominsk Districts of Moscow region, and the Troitsky Administrative area of Moscow. The project will include the four-lane highway, 14 bridges, 24 overpasses, and 3 flyovers.
The total construction cost is estimated at 52.3 billion rubles (1.16 billion euros). Public financing will be 45.62 billion rubles, with the developer investing 6.77 billion rubles. The agreement will be for 23 years.
Construction of the road should begin in 2014 and be completed in 2018.
In 2012 President Putin charged the government to develop a mechanism to engage foreign contractors in tenders for the construction of federal and regional highways. Therefore, the tender documentation does not contain any restrictions for foreign participants. Additional information is available at http://russianhighways.ru/for_investor/investitsionnye-konkursy/dolgosrochnoe-investitsionnoe-soglashenie-na-stroitelstvo-soderzhanie-remont-i-kapitalnyy-remont-tse/konkursnye-dokumenty/index.php .
Interest in the CCR project already has been expressed by the Department of Finance of Abu Dhabi (United Arab Emirates), which is willing to invest with the Russian Direct Investment Fund (RDIF) partnership.
The award of the contract will be announced on 30 April 2014.
Turkish conglomerate Yildirim Group acquires OJSC Mechel’s equity for US$ 425 million
In the spring of 2008, Mechel purchased Oriel Resources, which consisted of the CJSC Tikhvin ferroalloy factory, the Voskhod deposit, and the Shevchenko nickel ore deposit in Kazakhstan, for US$ 1.5 billion. However, these companies had to be sold pursuant to Mechel’s new strategic plan.
Yildirim Group is a privately-owned Turkish industrial group consisting of companies in 10 different diversified sectors over several countries. The group owns Eti Krom Inc., which is Turkey`s largest producer of chrome ore and the country's only high carbon ferrochrome producer. Yildirim Group also controls Vargon Alloy Ab, one of the first Swedish ferrochrome producers. Yildirim Group is the largest solid chrome ore producer and the second-biggest high carbon ferrochrome producer in the world.
In August 2013, Yildirim Group and Mechel signed the asset purchase agreement; and on 27 December 2013, the parties announced the closure of the deal.