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Japan Bank for International Cooperation (JBIC) has signed a buyer’s credit agreement amounting to US$2.66mn with Russia’s Rostelecom. The loan was cofinanced with Sumitomo Mitsui Banking Corporation (SMBC).

The loan will support Japanese exports financially by providing a direct loan (buyer’s credit) to Rostelecom in Moscow to import radio transmission equipment (manufactured by NEC) from Sumitomo Corporation in Japan.

Previously, JBIC provided loans for Russian corporations with guarantees attached by the Russian government, and also bank-to-bank loans which provides loans from JBIC to Russian banks in order to support Russian corporation buying Japanese exported plant and equipment. For this loan, however, JBIC assumed the credit risk of the Russian corporation directly in financing the loan for Rostelecom, a joint stock company providing long-distance and international telecommunications services in Russia. Since Russian corporations have increased their credit standing in recent years, JBIC is actively planning to take corporate risks in financing Russian corporations to support the exports of Japanese firms to Russia.

The Russian economy turned around in 1999, after the financial crisis of August 1998, and its GDP grew by 7.2% (preliminary figure) in the first half of 2003. In Japanese Manufacturers’ Overseas Business Operations 2003, an annual survey conducted by JBIC, Japanese manufacturing companies indicated growing interest in Russia as a destination for expanding their business activities over the medium term (next three years). (Russia ranked 10th, compared to 16th the previous year.) Compared with US and European firms, however, Japanese firms trail in expanding their business activities with Russia. Thus, JBIC loans are expected to support Japanese trade and investment activities aimed at Russia in the coming years.