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. Last Updated: 07/27/2016

Novel Location for Italian Firm

VOLZHSKY, Russia - While most Western businesses still, stick close to the friendly centers of Moscow and St. Petersburg, an Italian construction company has chosen the industrial town of Volzhsky, with a population of 300, 000, as the site for a huge workshop and warehouse complex.

Italsovmont has orders to build four factories in Russia and Ukraine so a central base for maintenance, training and handling made financial sense. But the choice of Volzhsky, 2, 000 kilometers southeast of Moscow, also made geographic sense.

Antonio Zedda, site manager, says that while Volzhsky may seem out of the way, the company decided it was a perfect site to use as a base.

"It is surprising but we are close to transport and communication here. The geographic location is quite good", he said.

Behind the company's success are a series of credit and trade deals organized through the Italian government, which has a deliberate policy of encouraging Russian firms to use Italian industrial infrastructure.

Italy also voted credits of $800 million a year for the purchase of industrial goods. The last of the 1990 credits has just been issued and 1991 credits are now being negotiated.

Italsovmont now has over $250 million of major construction projects either completed, underway or under negotiations.

Italsovmont first became involved in the Volzhsky region through the construction of a huge pipe factory. The Russian client, Metallurgimport, has operated the plant since it was completed in 1990, but Italsovmont still has modern accommodation for 500 workers in a camp nearby and maintains its head office for the former Soviet Union in Volgograd. Volzhsky is 40 kilometers from Volgograd, which has regular flights to Moscow. It is close to river transport on the Volga and the Don, and is also a major rail and trucking center.

From here, Italsovmont will send out two trucks a week to each of its major sites. Eventually it will also have a container rail link.

The center will have a full-time staff of about 300 when completed in the spring. In addition to auto workshops, precision pipe and welding shops and computerized warehouses, the facility will have a pizzeria restaurant for its Italian workers.

From Volzhsky, the base will service four big construction contracts: a $10 million reconstruction of the historic Red October steel mill in nearby Volgograd; a $50 million polyethylene production plant at Lisichansk in the eastern Ukraine; a $7 million deal to build a refrigerator factory at Lipetsk; and a multi-million dollar chemical plant near Odessa.

The company uses mostly Russian labor and buys construction materials on the local market. Several small-scale projects are done as barter deals to obtain materials for the bigger struction jobs.

Italy is the second biggest buyer of Russian natural gas - a fact which helps Italsovmont, the sub-contractor for ENI, the Italian state gas company. ENI and Gasprom, the Russian gas authority, have a deal under which Russia uses 20 percent of its hard currency earnings from gas sales to Italy to buy industrial equipment from Italian firms.