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. Last Updated: 07/27/2016

Banks Avoid Farm Financing Talks

Local banks were conspicuous by their absence at a conference on Thursday about financing Russian agriculture that was organized by the agribusiness committee of the European Business Club.

"As organizers we are very disappointed that there are no Russian banks here, even though we invited them," said Irene Commeau, general manager at EBC.

Michel Perhirin, chairman of Raiffaisenbank Austria, said agriculture is the priority business for his bank, but Russian banks fund 85 percent of the nation’s agriculture industry.

"We know that Russian banks have many problems, we are ready to cooperate," he said. "Why are Russian banks not here? Expanding their financing of agriculture should be their top priority."

Perhirin said Russian farmers have amassed enormous debts and everything they earn goes to pay them off, so banks had a big role to play.

Businessmen and politicians at the conference said that ownership rights, land law and real possibilities to improve productivity by investments are the elements of a successful domestic agricultural policy.

ECB chairman Seppo Remes said domestic agriculture cannot compete with heavily subsidized European agriculture without investments to improve productivity on the land.

"I sincerely hope that Russia will make long-term investment in sustainable agriculture," he said.

Former Agriculture Minister Viktor Khlystun, who is now general director of the Center for International Investment in the Agro-Industrial Complex, said domestic agriculture should be intensive, not extensive as it was in Soviet times.

"In last five years more than $5 billion has been invested in the farming industry," Khlystun said. "But look at how the investment was spent — 80 percent of it went on financing the tobacco, beer, confectionery and cakes industries."

Investment should start from the bottom up, he said.

Only a few companies that process local raw materials, such as foreign-owned dairy goods makers Danone and Campina and domestic Wimm-Bill-Dann, have been successful, Khlystun said.

Gilles Mettetal, senior banker with the EBRD in London, said the bank had invested more than 2 billion euros ($1.77 billion) in 122 projects, and about a third of the money has gone into agriculture.

He said the bank had found investing directly in raw-material production and had chosen large processors of farm produce such as Efes Pilsener, Carlsberg and Baltika, and confectioners Cadbury and Dirol, as partners.

The EBRD’s experience in Russian agriculture has not always been good; a few years ago the bank tried to finance fertilizer production, he said.

The project seemed interesting on paper, "but then the problems began — the state interference, thefts of the harvest, climate problems ... ."

The EBRD still has two such dormant projects that it will close down, Mettetal said.

Stephane Frapport, chairman of the EBC’s agribusiness committee, said foreigners are interested in Russia as an importer.

"Let’s target it," he said, "and one day Russia will stop importing eggs from Scandinavia, but will itself be an exporter."