The private investors already include foreign investors – notably Eurogate which has a 20% stake in National Container Carrier’s new container terminal project at Ust Luga, 150 kilometres from St Petersburg, and DP World which through its acquisition of P&O acquired a 25% stake in Vostochny International Container Service, the country’s leading container terminal operator in the Russian Far East port range – and clearly there is an interest on the part of other international port groups to invest in Russia given the right opportunity.

Potential investors see the strong growth in cargo throughput through Russia’s ports – for example container volume at Russian container terminals is expected to rise from just under 0.5m teu in 2001 to around the 7m teu mark by 2011 – and are naturally attracted to an area with strong growth prospects. Indeed, it is well known that the majority of big names in the international terminal operating business other than those already in residence – Hutchison, ICTSI, PSA International and others – have at one time or another evaluated projects in Russia.

To date, however, the number of foreign players in Russia remains limited – perhaps in part due to the limited number of opportunities there but perhaps also to the recognition that conditions in Russia push the envelope of the usual equation of swapping risk for reward. Certainly, independent terminal operators and other international port investors will be very mindful of what happened to Shell and the pressure that BP is now coming under to relinquish its Russian assets.

Shell was basically forced by Russia to halve its stake in its Sakhalin-2 project from 55% to 27.5%, while Mitsui and Mitsubishi also had their shareholdings reduced to 12.5% and 10% respectively. BP has a joint venture company in Russia, TNK-BP, and in recent times it has run into a dispute with the four Russian oligarchs it signed the joint venture deal with in 2003. Basically, the problem is that the Russian state wants to get involved in some of TNK-BP’s biggest projects and potentially take a stake in the company itself.

The bottom line reality is therefore that Russia remains somewhat primitive as an investment location for foreign companies including investors in the port sector. ASOP acknowledges ongoing difficulties with government agencies over issues such as securing government approvals and renegotiating concession deals. Aside from these important technicalities, however, what is undoubtedly the biggest cause of concern to both actual and potential foreign investors is the unhealthy interest the state has in returning certain key strategic assets back from foreign to public ownership.