Silk Road through the Russian Far East: Chinese to invest in Yakutsk IT park

Meetings with Chinese companies at the East Russia Economic Forum (Восточный экономический форум) in Vladivostok have resulted in agreements to build an IT park in Yakutsk, capital of the Sakha Republic, also known as Yakutia. There have also been further talks on an oil refinery project said to be backed by CNPC.

The Chinese partner is Huaqing Housing Holdings (华清安居控股有限公司), a developer established by research institute of Tsinghua University (‘Huaqing’ is just ‘Tsinghua’ spelt backwards) and backed by SOEs and state financial institutions. As I’ve been describing in a series of posts during the last few months, Huaqing have been one of the Yakutian government’s main interlocutors in talks on potential Chinese investment in the republic, and Zhu Chunyu 朱春雨, the company’s chairman, is a frequent visitor to Yakutsk.

Huaqing has also signed an agreement to cooperate with Almazergienbank Алмазэргиэнбанк, the largest in Yakutia, which has been increasingly partnering with Japanese and Chinese institutions, including China Construction Bank (建设银行).

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Chinese-built bridge over the Lena in Yakutsk?

Chinese investors, including a subsidiary of China Railway Construction Corporation (CRCC, 中国铁建), appear to have shown interest in building a bridge over the Lena river near Yakutsk in the Russian Far East, a challenging, long delayed project that would finally join the isolated city to the country’s road network.

Yakutsk, capital of the Sakha Republic (Yakutia), lays west of the Lena river, crossable by ferry during the summer, on ice in winter, and not at all the rest of the year. Once on the east bank, the options used to be the 2000km ‘Kolyma road’ (Колымская трасса) farther east to Magadan, going through some of the coldest places on Earth, or the road along the river (just paved; formerly rather scary) that eventually joins the Trans-Siberian highway. A railway line (so far for freight only) reached Nizhny Bestyakh on the east bank last August after nine years under construction, but the bridge over the Lena, the final stretch that would finally provide Yakutsk with a land link to the rest of the country, was delayed until at least 2020, allegedly because funds earmarked for it were repurposed for infrastructure investment in Crimea. (A major project there is the bridge over the Kerch Керчь strait, meant to link the peninsula to the rest of Russia. Reports a year ago that CRCC, the Chinese state company now said to be interested in the Yakutsk link, would be involved in building the Crimean bridge were promptly denied by the company.)

Unwilling to wait until 2020, Yakutian officials have seemingly set out to find private investors to build the bridge anyway, and are scheduled to present their plans at the East Russia Economic Forum (Восточный экономический форум) next September in Vladivostok. The good news is that investors have apparently just popped up, from the east.

A month ago, a delegation from the Heilongjiang federation of industry and commerce (黑龙江省工商联) was in Yakutsk. (Contacts between Chinese provinces and Russian federal subjects are increasingly frequent.) Among the visitors was Tao Ran 陶然, chairman of Sirius Holdings/Sirius Power Station Equipment (天狼星电站设备有限公司), who told TASS about a $40bn Chinese transport infrastructure fund as one source that could be used, “on the basis of a state-private partnership, for building a bridge crossing over the Lena river.” An account of the visit from the Chinese side also says a “railway bridge” (the TASS report talks of a road link) was a topic of the exchange among other potential projects, but there’s no mention of any company specifically related to that kind of infrastructure (alongside Tao’s power plant business, there were representatives from a coal miner and baijiu distiller Beidacang 北大仓, for example).

A more specific discussion took place earlier this month, when the Yakutian officials went into the “technical aspects” of the bridge project with Zhang Hui 张辉, a deputy department head at China Railway 24th Bureau (中铁二十四局集团), a subsidiary of the state-owned CRCC (中铁). There was also Chen Haijun from a Blagoveshchensk-based subsidiary of Longxing International Resource Development (黑龙江龙兴国际资源开发集团), a company established by the Heilongjiang provincial government. (The name Longxing, occasionally mistransiterated ‘Lunsin’ from the Cyrillisation Лунсин, is better known as for the similarly-named operator of the Kyzyl-Tashtyg Кызыл Таштыг (‘red stone‘) polymetallic mine in the Tuva Republic, that has just entered production. The company behind Kyzyl-Tashtyg is majority-owned by Zijin 紫金 Mining, with Heilongjiang province’s Longxing as a minor partner. The Longxing who visited Yakutia appear to be a direct subsidiary of the Heilongjiang province, thus not implying any Zijin participation.) Details aside, the fact that people from CRCC actually visited the site of the projected bridge and discussed technical issues lends more credibility to the claim that there is serious Chinese interest in the bridge.

The bridge was also a topic of discussion during a visit this week by another Chinese delegation. This time the guests included Zhu Chunyu 朱春雨, chairman of Huaqing Housing Holdings (华清安居控股有限公司), an investor whose background I had occasion to describe when the company signed an agreement to build an oil refinery in southern Yakutia. (Also present was Liu Li 刘理, involved for years in working with Yakutia for the Yunjin 云津 investment fund, now credited as representing a Heilongjiang province investment commpany.)

Here’s what Zhu had to say about the bridge over the Lena: “We’re interested precisely in such large-scale infrastructure projects. I think that this project should be looked at based on a 30 to 50 year perspective, when technology will be more developed. Now we can’t even predict what kind of transportation will be circulating on this bridge within 20 or 40 years.” Based on the capabilities and experience of Chinese companies, he estimated that “we could build the bridge in 3.5 years” which sounds quite specific. Huaqing don’t build bridges themselves as far as I’m aware; their role would probably be attracting funding and bringing along technical partners, the way they apparently got CNPC’s support for the refinery deal.

If it goes ahead, the Lena bridge wouldn’t be the first such project in the Far East to be spurred by Chinese participation. The rail bridge over the Amur river, between Tongjiang 同江 in Heilongjiang and Nizhneleninskoye Нижнеленинское in the Jewish Autonomous Oblast, has also suffered a series of delays, but construction on the Chinese side is going quickly at the moment and might be finished this year. The Russians haven’t started their part yet, and Russian officials are now saying the Chinese contractor could end up building the whole thing.

Yakutsk is some 400km south of the Arctic circle, but with -38 °C January averages it honorarily belongs inside. From that point of view, the Yakutsk bridge would be the second Arctic one with Chinese participation, the first being the Hålogaland in northern Norway, the tender for whose steelwork was won (in rather peculiar circumstances) by Sichuan Road and Bridge Group (四川路桥) in 2013.

Chinese company to build refinery in Yakutia

An agreement was signed two weeks ago in Beijing between Russian and Chinese companies to build an oil refinery in Aldansky district (Алданский улус) in the south of the Sakha Republic, a Far Eastern Russian region also known as Yakutia. The plant is planned to be have a refining capacity of 2m tonnes of oil per year, making it the fourth largest in Yakutia, and to cost $2bn.

The Chinese investor, Huaqing Housing Holdings (华清安居控股有限公司), is a developer established by a Tsinghua University architecture researc institute, with the backing of train manufacturer CNR (北车), a central SOE, financial institutions including China Development Bank (CDB) and the China Association for the Promotion of Development Financing (CAPDF, 中国开发性金融促进会, a newish institution whose top people come from CDB, among them its former and current chairmen Chen Yuan 陈元 and Hu Huaibang 胡怀邦). Huaqing is led by Zhu Chunyu 朱春雨. Besides a couple of projects in China, they claim to be about to build some villas in Dubai. The Beijing meeting also included representatives from oil giant CNPC, so presumably they might also become involved in the project.

On the Russian side we have a local company, Tuymaada-Neft (OAO НК Туймаада-нефть), based in Yakutsk and led by Ivan Makarov, who also chairs Sakhatransneftegaz Сахатранснефтегаз, a gas pipeline operator majority-owned by the Yakutia government, and sits as a deputy at the Il Tumen, the local parliament. Also present in Beijing was Valery Tian Валерий Тян, who besides working for Tuymaada is often involved in contacts between Chinese companies and the local government in his capacity as advisor to the president of the Republic.

The plant will refine oil into fuels to be sold locally. Fuel prices in Yakutia are among the highest in the country.

I have written before about the increasing cooperation between the Russian Far East and specifically Yakutia. The latest example semms to be an agreement between the sport bureaus of Yakutia and Heilongjiang province.