INVESTMENT

Western sanctions force Russian firms to look to Hong Kong and East Asia

Hong Kong, Shanghai and Singapore are taking over as destinations in the wake of Western economic measures imposed on the Kremlin

PUBLISHED : Tuesday, 02 September, 2014, 9:38am
UPDATED : Wednesday, 03 September, 2014, 12:53am

The pressure of Western sanctions on Moscow is pushing the flow of Russian money, companies and energy firms to China and Hong Kong.

The Russian banking sector, which traditionally looked to London for partners and investors, has started eyeing Shanghai, Singapore and Hong Kong, said Simon Cheung, chief Hong Kong representative of International bridge for Co-operation, Development & Investments (ICDI), which is partly owned by a Russian state-owned firm, Russian Venture.

"Hong Kong could potentially replace London as the first destination for the Russian companies to conduct fund raising and financial activities," he said.

This was underscored when Russian President Vladimir Putin told Vice-Premier Zhang Gaoli that Rosneft, the biggest Russian state-owned oil company, would invite Chinese firms to take a stake in Rosneft's Vankor project, a report said. Vankor, the second-biggest oil project in Russia, produces 440,000 barrels per day.

Zhang and Putin presided over the launch of the construction on the 4,000 kilometre "Power of Siberia" pipeline, being built by Russian state-owned energy firm Gazprom, which will start sending Russian gas to China in 2019, the media reports said.

Hong Kong could potentially replace London … for the Russian companies
SIMON CHEUNG, ICDI

In May, Gazprom and China National Petroleum Corp (CNPC), China's biggest state-owned energy firm, signed a US$400 billion deal to ship nearly 40 billion cubic metres of gas to China annually over 30 years.

The energy co-operation between Russia and China will boost bilateral trade to US$100 billion by 2015 and US$200 billion by 2020, said Xinhua.

In June, Megafon, one of Russia's top mobile operators, converted 40 per cent of its cash of US$1.3 billion into Hong Kong dollars, and Norilsk Nickel, the world's largest nickel producer headquartered in Russia, converted part of its cash to Hong Kong dollars as well, reports say.

More Russian companies are coming to Hong Kong and China, said Ashley Galina Dudarenok, managing director of Alarice International, a Hong Kong consultancy that advises multinationals on their strategies for Hong Kong and China.

"We were previously receiving one inquiry per month from Russian clients interested in a physical business in Hong Kong or China, now it's four to five inquiries on a monthly basis," said Dudarenok.

An unnamed Russian bank is working on coming to Hong Kong by the end of this year and many other Russian firms are trying to follow suit, she said.

"For example, we were recently contacted by a client from Russia that runs fur coat retail stores in the USA and now wants to expand his enterprise in Hong Kong, as the US market is not doing that well in comparison to China and Hong Kong," she said.

 

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