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Russia: Primakov Supports Three Gulf Of Finland Ports

St. Petersburg, 25 February 1999 (RFE/RL) -- Russian Prime Minister Yevgeny Primakov is giving his full support to the final construction of three ports on the Gulf of Finland.

The projects -- if completed -- could have a profound effect on the region, leading to the further development of Russia's northwest while potentially damaging the economies of neighboring Baltic States. The Baltics currently handle large volumes of Russian transit trade.

The idea for the ports -- at Ust-Luga, Bukhta Batereinayaat and Primorsk -- was first raised in the early 1990s. It wasn't until June 1997, however, that President Boris Yeltsin issued a decree supporting their construction.

The fate of the ports had been thrown into doubt following last August's Russian financial crisis. Investors had been holding off on further financing until Primakov's government sent strong signals it would continue to support construction.

During a government meeting in Saint Petersburg last Sunday, Primakov said no one doubts that construction of the ports is necessary. He said: "If we all agree that it is necessary, then let's get the job done."

Construction of the three ports is considered by supporters as a way to reduce Russia's dependence on exporting through the Baltic States, through which most of Russia's western-bound trade travels.

Russian officials have long claimed that shipping through those countries is costly and also harmful to Russia's national interests since it makes Moscow dependent on countries with whom it has chronically strained relations.

For their part, the Baltic states gain a great deal economically from the Russian transit trade. According to a recent report in the state-owned Russian newspaper Vesti, about 25 percent of Latvia's gross national product, for example, is tied to the transit trade, with large amounts coming from Russian oil.

Many of those present at last Sunday's meeting with Primakov said they believe that -- while the government can do little in the way of financing -- it should at least create the necessary conditions for investors.

Acting Leningrad regional governor Valeri Serdukov told Primakov that a loan of 200 million DM for a dry cargo port at Ust-Luga is pending from the German concern Hermes, but that federal officials have been stalling on a federal guarantee for the loan.

Primakov responded angrily, saying that he could understand if a project was stalled because of some objective reasons. But when a project has been approved, he said, and investors are already making an offer, there are no excuses. Said Primakov: "The federal government is to blame for this."

The port at Ust-Luga and the oil port at Bukhta Batereinaya -- which is to be built and wholly owned by Surgut Holding -- have been under construction since 1997. Both ports lie to the southwest of Saint Petersburg.

Surgut -- Russia's third-largest oil producer -- should complete construction on the first half of the $220 million port by the end of 2001. That's according to Surgut general director Vladimir Bogdanov, who attended last Sunday's meeting.

The port will have a capacity of 7.5 million tons of oil a year, but construction has been slowed because of financial problems. Bogdanov spoke with Primakov to express his opposition to the government's recently enacted five-percent export tax on oil. Besides the new port, Surgut is also building a $100 million pipeline to link the port with its Kinef oil refinery in the Leningrad region. Construction on the third Gulf of Finland port at Primorsk -- some 120 km northwest of Saint Petersburg -- has yet to begin. If built, it would provide an outlet for the unfinished Baltic pipeline system designed to pump oil from northwestern Siberia.

The port at Primorsk has long been on hold due to financial problems, disputes within the government, and the presence of competition from the nearby Finnish port of Porvoo, which is already completed.

Last Sunday, though, government officials gave their support to construction at Primorsk, saying work will begin later this year.

The Primorsk oil port is expected to take 10 years to complete and cost almost $4 billion. It is planned to handle 45 million tons of oil and petroleum products a year. The first segment of the port, however, should be running by the end of 2001 and will be able to handle the export of 12 million tons per year.