BOFIT Viikkokatsaus / BOFIT Weekly 2017/45

An under-the-radar Chinese firm, CEFC China Energy, which had never invested earlier in Russia, has in recent months been preparing several corporate acquisitions in relation to a few Russian and international actors. CEFC announced in August plans to purchase a 14 % stake in Rosneft, part of a stake that had been acquired at end-2016 by a joint venture of the Swiss Glencore and the Qatar Investment Agency (QIA). Last week, CEFC participated in the IPO of Russian power and aluminium producer En+, as did the QIA. The Russian VTB might lend CEFC much of the money needed to finance these acquisitions. VTB earlier provided credit to Glencore and QIA in the initial Rosneft deal. In addition, VTB is a minority stakeholder in En+ and its major creditor. Glencore will also get a stake in En+ through a share swap. According to media reports, both CEFC and QIA have also negotiated about acquisitions or joint ventures with the NNK oil company, which is owned by Rosneft's former CEO Eduard Khudainatov. Both Rosneft and NNK are subject to certain US economic sanctions. The total value of CEFC's planned purchases is estimated to exceed 12 billion dollars.

Otherwise, Russia-China economic relations continue to be dominated by goods trade. Russian exports to China last year were worth approximately 30 billion dollars, while the value of imports from China was about 40 billion dollars. China has been Russia's biggest provider of goods imports for several years, accounting for over 20 % of goods imports. This year China also became Russia's top goods export destination, accounting for 11 % of Russian goods exports in January-August. Oil represents the lion's share of Russia's exports to China. Natural gas exports are expected to start in coming months as the massive Yamal peninsula LNG project, which includes Chinese investors, becomes operative. Pipeline transmission of natural gas is scheduled to begin in December 2019. Services trade between the two countries is much more modest than goods trade, but has been supported e.g. by the recent boom in Chinese tourism. Nearly 1.3 million Chinese tourists visited Russia last year, making them Russia's fourth largest tourist group.