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. Last Updated: 07/27/2016

Putin Criticized Over Infrastructure Bonds

Offering rare criticism of Prime Minister Vladimir Putin, several government officials on Thursday derided his orders to draw up legislation for "infrastructure bonds" to overhaul the country's dilapidated infrastructure.

"Infrastructure bonds can be issued without the adoption of any special laws," said Alexander Sinenko, deputy head of the Federal Service on Financial Markets, which Putin has tasked to draft the legislation.

"Legislation on bonds is very well developed in Russia, but since we have received orders, we will draft the law," Sinenko said at a round-table discussion on the issue.

Putin told the agency in November that it had until July to draw up the legislation. Under an early version of the bill made public in March, the bonds' maturity will vary from five to 25 years, and the minimum value of an issue will be 5 billion rubles ($161 million). Each issue will be focused on a certain project. Putin has promised state guarantees for projects deemed especially big and socially important. Sinenko said his agency was seeking tax concessions for buyers of the bonds, which are expected to be mainly pension funds.

Rostislav Kokorev, deputy head of the Economic Development Ministry's corporate governance department, said the ministry was regularly getting letters from governors asking for help in getting state guarantees on infrastructure bonds, which they want to use to finance the construction of cement and car plants, among other things.

"Hoping to get state guarantees, some are ready to call anything infrastructure bonds because there is no strict definition of that now," he said. "Why don't we issue fishing bonds then?"

The only company that has so far announced a placement of infrastructure bonds is Russian Railways, which issued bonds for 30 billion rubles this year.

Sinenko, however, said he had checked the documents for the issue and had not found the word "infrastructure" there.

"Frankly, we used it for the PR purposes," said Yury Novozhilov, first deputy head of the corporate finance department at Russian Railways. "However, Russian Railways is an infrastructure company, so all the bonds it issues are infrastructure bonds, right?"