$570Bln for Transportation Overhaul

APPrime Minister Vladimir Putin speaking during a meeting on transportation infrastructure in Sochi on Tuesday.
Prime Minister Vladimir Putin approved on Tuesday the country's largest spending project since the Soviet collapse, a $570 billion program to overhaul and expand the country's transportation infrastructure over the next seven years.

"If we won't develop infrastructure, we won't have a future," Putin said Tuesday at a meeting in Sochi. "This is the biggest investment program ever approved by the government."

While the amount of the planned investment is eye-popping, it is no surprise and is simply a compilation of previously announced investment projects, said Eduard Faritov, a transportation and automotive analyst at Renaissance Capital.

Putin said one-third of the 13.5 trillion rubles the government plans to spend to develop road, rail, air and port networks through 2015 will come directly from the federal budget. The rest will come from "nonbudgetary" funds and companies including state-run Russian Railways.

Dilapidated transportation networks act as a "brake on the economy," Putin said.

As much as 70 percent of all railroads, highways, ports and airports are "outdated," with 3 million people living in 40,000 settlements without year-round roads or rail access, Transportation Minister Igor Levitin told the Cabinet last month.

After eight years of economic growth under his presidency, Putin said he now plans to take advantage of the country's wealth to improve transportation, health care and education, to promote agriculture and scientific research and to raise military pay, among other priorities.

The country has some natural resources deposits that currently cannot be extracted because there are no roads to reach them, Putin said. Better networks will also allow the country to become an important transit route for goods flowing between Europe and Asia, he added.

The spending plan calls for building 17,000 kilometers of roads, 3,000 kilometers of railroads and more than 100 airport runways, Putin said. It also calls for boosting annual port capacity by 400 million tons of cargo.

Companies including Russian Railways, Sovkomflot, the nation's biggest shipper, and the operator of Sheremetyevo Airport will participate in the planned infrastructure development, Levitin told reporters in Sochi.

"We have agreed with them about the amount of allocated resources," he said. Levitin, who also took part in Tuesday's meeting with Putin, Deputy Prime Minister Sergei Ivanov and other officials, did not provide details.

Vladimir Dmitriyev, the chairman of Vneshekonombank, said companies might sell "infrastructure bonds" to finance transportation projects. The government is considering guarantees for these bonds or allowing Vneshekonombank to issue them, he said.

Faritov, the transportation and automotive analyst, said the $570 billion plan "sounded like a summation of all earlier budgetary allocations."

"First, Russian Railways said it would earmark $50 billion for improving railroads, then we heard that $400 billion was budgeted for reconstruction of transport infrastructure. There is also a separate program for improving the ports. Therefore [the combined figure] is not a huge amount. It is smaller than what we heard announced before," he said.

Bloomberg, MT