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. Last Updated: 07/27/2016

St. Pete Takes Control Of Ring Road Project

ST. PETERSBURG -- The city administration has taken control over the $1 billion St. Petersburg Ring Road project from its supervisory joint stock company, KAD, after it had failed to attract any foreign investment. The city will now refocus its efforts on finding local and federal budget money to fund the project.

KAD was founded by city and regional authorities, along with more than 20 private Russian companies, in 1997 to oversee construction of the road planned to circle the city and, particularly, to search for investors. Foreign investors were seen as a way to make up for a shortfall of government financing.

City officials, who requested anonymity, claim that KAD has wasted the two years by not actively seeking out foreign investors, according to local business newspaper, Delovoy Peterburg.

But former KAD management claims that it did not have sufficient time for the proposal. "The company had no time to start the project," said Oleg Kashchenko, a former executive of KAD, who now heads the city hall Ring Road department, under the municipal committee for maintenance and roads.

But current KAD officials were not available for comment Monday. Staff at KAD has been cut dramatically since April, when St. Petersburg Governor Vladimir Yakovlev transferred supervisory powers of the project to city hall.

Last April, city hall also hired an international consortium of advisers, KPMG and Global Management & Consulting Service, to help with financial planning, promotion and the updating of a 1995 feasibility study conducted by Italian company Spea. But the contract for these services has never been signed.

"We did not receive an official refusal [of our services]," said Marina Rapoport, senior manager of the tax-legal department of KPMG-Russia, adding that the company is ready to start work and is in negotiations with the city.

The city has started approaching federal officials for state budget money. During his Aug. 14 visit, Deputy Prime Minister Nikolai Aksyonenko visited the first stretch of the road under construction and promised to hold an official meeting in September on further financing possibilities, Kashchenko said.

He said 950 million rubles ($38.3 million) were allocated in federal, city and region budgets for construction in 1999, but did would not say the amount already released this year to the project.

"The first 32 kilometers will be fully financed from budget resources," Kashchenko said Monday.

An initial 1995 feasibility study estimated the total cost at $1.5 billion. Total project investment could, however, be further reduced through the use of new energy and material-saving technologies. Since the ruble devaluation, construction materials and labor costs have declined, adding to an overall reduction of the total investment needed, Kashchenko said.

The original study called for the highway to be 153.5 kilometers long and have from six to eight lanes. The road, 60 percent of which is to run across the Leningrad region, will also include the uncompleted Gulf of Finland dam that stretches from Gorskaya to Bronka.

The first section of the road, located northwest of the city, has recently begun construction. The entire western portion of the ring road is slated for completion in 2003.