beyondbrics

Yakutia, a Russian republic the size of India, is hiding a $3bn treasure beneath its soil and its looking for investors to unlock it.

Yegor Borisov, Yakutia’s president, described his Siberian homeland’s enormous mineral wealth and appealed for the investment to tap it at the London Stock Exchange on Thursday.

If Borisov is to be believed, there are “mammoth opportunities” in his equally mammoth republic. Yakutia, officials claim, contains a quarter of the world’s diamonds, 6.5 per cent of its natural gas, 5 per cent of its tin, over 4 per cent of its antimony, 3 per cent of its uranium, 2 per cent of its iron ore, 1.5 per cent of its oil and nearly 3 per cent of its timber.

Clearly there are opportunities for investment – particularly if Yakutia follows through on its promise – which, according to Borisov, was “agreed with the central government” – to sweep aside red tape to allow “foreign capital to be directly invested in the region”.

But Yukutia must overcome a shortage of infrastructure to make that happen. The first problem is access – as Borisov noted, Yakuvia is “cold and far away”. There are no easy ways to get product to market.

Companies located there paint a difficult investment picture. Alexander Ogly, deputy chief executive of Surgutneftegaz (SNGS:MCX), a Russian oil company, noted that when his company first invested there was “no energy infrastructure, no roads, no railways and no airports… so [Surgutneftegaz] had to do it itself from scratch.” That took seven years and $7bn.

And although other big companies are there – including Russian groups like Gazprom, Alrosa, Polyus Gold and Mechel – Yakutia’s share in the Russian economy is still less than 1 per cent. The republic hopes to increase that to 5 to 6 per cent by 2025.

That is why Yakutia is out looking for investment – Borisov left for the US straight from the stock exchange. As well as other Russian regions, Yakutia is competing with the likes of Mongolia whose infrastructure is far more advanced and can also boast close links to China.

Yakutia’s investment vehicle, the RIC, has already invested more than $1bn in infrastructure since its inception five years ago and plans to tap international bond markets from next year to invest more.

However, the scale of the task is huge and Yakutia cannot do it all by itself. That is why it is touring the world promising stable regulation to allow partnerships with the private sector to take some of the strain.

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