VLADIMIR PUTIN
ARCHIVE OF THE OFFICIAL SITE
OF THE 2008-2012 PRIME MINISTER
OF THE RUSSIAN FEDERATION
VLADIMIR PUTIN
ARCHIVE OF THE OFFICIAL SITE
OF THE 2008-2012 PRIME MINISTER
OF THE RUSSIAN FEDERATION
VLADIMIR PUTIN
Despite a slowing growth rate, the Government of France still estimates the GDP for 2008 to grow by 1.7%-2.0%. Estimates of experts from Brussels and the OECD are more modest, not exceeding 1.6%. The Government has proposed a package of social-economic measures designed to improve the situation. The main emphasis is on tax reforms intended to stimulate entrepreneurial activity and increase employment.
In the current year it is planned to continue reforms in three basic directions - restructuring the labour market, reducing state spending, and increasing the population's purchasing power. Changes to the pension system, measures to effectively end the 35-hour working week, and a decrease of prices in the retail and services sectors are planned.
President Nicolas Sarkozy and his team so far enjoy a large enough parliamentary majority to push through the most important reforms. It is expected that realisation of these plans will finally result in at least 1% of GDP growth. Without that it will be hard for France to reckon on actual improvement of the social and economic situation or increase of its international competitiveness.
Paris is thoroughly preparing for its presidency of the EU, which starts in July 2008. Economic growth and employment in the European area, environmental control and some other issues are its top priorities. Planned measure include proposals to increase the competitiveness of European enterprises, encourage innovation, support small and medium-size business, improve financial policy, and improve the dialogue of governments with the European Central Bank.
Traditionally France is one of Russia's main trade and economic partners. Bilateral relations in this area are built on the basis of a range of favourable factors. They include:
1. High level of political dialogue between Moscow and Paris and recognition by them of the importance of cooperation in the trade and economic sphere.
2. Stable structure of mutually advantageous trade with fuel-energy goods dominating Russia's exports.
3. Constantly increasing prices for energy sources and an increasing Russian share in their supplies to France.
4. Increase of French exports to Russia. Development of European integration, expansion of the European Union. Considerable increase of investment activities of French companies in Russia.
5. Increase of the GDP and domestic demand in Russia that encourages French exports. Realisation of large joint projects, connected with the development of Russia's hi-tech industries.
The combination of these factors has provided remarkable positive changes in foreign trade turnover between Russia and France, which increased by almost 14% in 2007, year-on-year. The increase of trade in commodities to 16.7 billion euros (according to French statistics) is generally provided by the increase of Russian imports (by 40% in 2007), leading to a gradual reduction of our net positive foreign trade balance (down to 5 billion euros).
The structure of Russian exports has not significantly changed. Eighty percent of Russian exports are raw goods (oil and oil products, metal, timber), and the share of finished goods does not exceed 2%. The main imports from France are, on the contrary, cars, equipment, tools, perfume, pharmaceutics and the output of the automobile, aviation, chemical, textile and food industries.
The long-term strategy for cooperation between Russia and France is to build up cooperation in science-intensive industries (aviation, space, information technologies, etc) and investment. The scientific, technical and industrial potential of our countries makes us mutually interested in realising considerable competitive projects.
The participation of the French companies Safran and Thales in Russia's Superjet regional aircraft programme is of great significance. The test flights have been carried out, and industrial production is expected in 2008. This project is an important element in the revival of the Russian aviation fleet and its approach to the international market.
The cooperation between Russia's United Aircraft Building Corporation (UABC) and EADS group is expanding: there is a joint enterprise established for converting А-320 and А-321 passenger liners into cargo modifications; UABC participates in the building of the А-350 aircraft. Agreement regarding supply of 22 long-range Airbuses to Aeroflot has been signed.
The project Soyuz is successfully implemented on Kourou. Building works are being carried out, and the first launches are expected in 2009. This lays the foundation for a global partnership between Russia and Western Europe in the area of space transportation systems. In particular, it enables the development of a new generation of launch vehicles in the framework of the programme Ural.
Russian-French energy dialogue is developing dynamically. Gazprom and Gaz de France have extended till 2030 their long-term agreements regarding supplies of Russian gas. The partners cooperate in transporting gas to Western Europe, including the North Stream gas pipeline from 2010, and implementing a range of projects in third countries. The participation of Gazprom in supplies (together with Total) of liquefied gas to Canada is being discussed. Gazprom's share in the French gas market now approaches 25% (1.5 billion cubic metres annually).
The French oil company Total extracts oil from the Kharyaginskoye field (its investments total approximately $600 million). Total and Gazprom signed an agreement on setting up a joint venture with a French share of 25% for exploration of the Shtokman gas-condensate field. Total's investments into this project are about $5 billion. The company's management intends to expand its interaction with Russia.
Rosatom's cooperation with AREVA in nuclear power meets our interests. France participates in programmes for utilisation of surplus weapon-grade plutonium. The agreement has been signed on establishing a joint venture between Atomenergomash and Alstom Group for the production of low-speed turbines for APPs (with the investments of 300 million euros). Expected annual volume of sales is up to 1 billion euros. Rosenergoatom and Électricité de France are realizing a project with an estimated value of $30 million aimed at increasing safety at the Kalininskaya APP.
French investors are paying increasing attention to science-intensive branches of the Russian economy. Alcatel participates in production of fibre-optics in the Moscow Region, and with Rostelecom is modernising the fibre-optic network in some Russian regions together with Rostelecom.
Peugeot-Citroen Group is establishing automobile production on the territory of Russia with investments of 200 million euros. Renault is increasing the output of its Logan model in Moscow (up to 160,000 by 2009), has purchased a 25% stake in Avtovaz for $1 billion and will be upgrading it for production of 720,000 modern cars under the Lada brand annually. Auchan is expanding its distributive network in Russia from 15 to 29 supermarkets. Vinci, Buick, and Sagem are showing interest in building Russian highways and high-speed railways.
Regarding chemical production, Severstal and Air Liquide are currently building a joint enterprise for air dialysis in Cherepovets, in which they have invested 100 million euros. Lafarge is investing money in upgrading their cement plant in the town of Voskresensk. Ciments Francais has purchased a 5.4% share of the Sibirsky Tsement, a cement company that holds 10% of market share in Russia and 65% in Siberia.
Ties in the banking sector are developing. The large French banks (Société Générale, Paribas, etc.) are investing in Russian consumer credit organisations, such as DeltaCredit and Promek Bank. Société Générale has purchased about 30% of Rosbank for $2.3 billion and now holds the controlling block of shares. The French insurance group Aksa has purchased a 36.7% stake in the Russian company Rezo-Garantiya.
The leading French pharmaceutical group Servier has launched the production of modern medicines with an annual production capacity of 60 million packages in the town of Sofrino. The company Desir is planning to open 10 top-quality chocolate shops in Russia by the end of 2008.
France participates in recovery of cattle population in Russia. Cooperation in the phyto-sanitary area is developing; there is an exchange of experience in fighting bird flu. The parties have agreed to interact in the area of village infrastructure, certification of seeds and training personnel at different levels, including interregional.
According to various estimations, the aggregate volume of accrued French investment into Russia's economy was about $5.9 billion in 2007. Direct investment amounted to $1.5 billion (eighth place), which is still much lower than possible. In Russia there are about 500 enterprises with participation of French capital, and 180 fully controlled by it. Meanwhile large corporations and companies are now major investors into the Russian economy. The potential of small and medium-size business is still insufficiently exploited. The geography of French investment is slowly expanding, but is mostly concentrated in Moscow (about 300 enterprises) and St Petersburg.
Russian business in France consists of about twenty joint ventures, acting mostly in services (banking, insurance, travel, commercial shipping). The joint stock company Starsem is one of the most noticeable. It provides services for commercial launches of Soyuz rockets (so far from the Baikonur cosmodrome, and in future from the Guiana space centre). Norilsk Nickel, Stroymontazh, Lomonosovsky Porcelain, Gazexport and Vnesheconombank have opened representative offices in France.
The volume of Russian investment in France is far from the existing potential. Several investment projects can be pointed out: Stroymontazh in cooperation with Vinci has purchased a plot of land for housing development in a Paris suburb for 75 million euros. Lomonosovsky Porcelain has purchased a controlling share in a plant producing Limoges porcelain. Russian Vine Twist has purchased assets of the cognac firm Croiset-Eymard.
The French Government supports the national business community in its foreign economic activity. The interest of the French business community in expanding contacts with the Russian regions is growing. However, the mutually advantageous potential of such ties is still seriously underused. For the effective build up of decentralised partnership, especially between small and medium-size enterprises, further improvement of mutual loan guarantee mechanisms are necessary, especially for large joint projects. Also cooperation of local chambers of commerce and industry, and associations of business communities should be encouraged.
The non-government Russian-French Dialogue Association is functioning constructively. Senior managers from major companies, banks, and business alliances (Aeroflot, Vnesheconombank, RSPP, Gaz de France, Renault, MEDEF and others) are among its founders. Events useful for bilateral cooperation are held with the support of this organisation regularly.
The need for significant activisation of "interpenetrative" investments was noted at the 14th session of the Russian-French Council for Economic, Financial, Industrial and Trade Questions (CEFIQ) in September 2007. This should result in the acceleration of innovation development in both countries, elimination of trade imbalances, using cooperation in hi-tech areas as the basis for mutually advantageous relations at different levels, including interregional.
An agreement has been reached on creation of a bilateral mechanism to carry out primary economic and financial examination of joint projects and assist in raising funds for their realisation. The regional development working group was organised in the framework of CEFIQ.
The conclusions of CEFIQ were developed into the documents of the 12th session of the Russian-French Commission on Bilateral Cooperation at the level of heads of government (November, 2007). The parties stated the privileged character of multipronged trade and economic partnership between Russia and France, based on effective political dialogue, and the necessity of stepping up joint efforts to increase international competitiveness.
In general it should be noted that stronger attention of the French business community and political circles to Russia positively influences the progressive character of bilateral cooperation.
