Baoli Bitumina Singapore will invest $2.7 billion in infrastructure projects located in the Russian Far East.
Singapore company Baoli Bitumina Singapore (BBS), a subsidiary of UK-based firm Denimotech Holdings and part of Bitumina Group, will invest $2.7 billion in infrastructure projects of the Far Eastern Federal District of the Russian Federation.
A memorandum of understanding (MOU) on trade, economic and investment cooperation with the Ministry of Development of the Far East and the company from Singapore, was signed yesterday during the Krasnoyarsk Economic Forum.
Specialising in the production of bitumen, BBS provides bitumen & asphalt solutions, covering the spectrum of production, packing, shipping and export of bitumen, as well as assisting in developing and producing specialty products like polymer modified bitumen (PMB) and related services, to parties and vendors along the supply chain.
With $50 million allocated to the construction of a bitumen plant and an estimated $200 million set aside for developing maritime infrastructure, the new facility is stated to be aimed at serving both domestic and foreign markets. It will focus on exports to China, Japan and the markets of Southeast Asia by sea and by the rail.
With the emergence of the Northern Sea Route and the potential of Arctic shipping lines, this investment is the first of many more infrastructure projects to come. Given the current political environment and international relations with the EU and North America negatively impacted by its actions in the Ukraine, this is reflective of Russia’s pivot to Asia and desire for Chinese-Russian collaboration.
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Increase Chinese and Japanese investment in Russia also reflects security, energy and economic interests from China, with increased capital flows into the region focused on developing the infrastructure in ports and cities along the Northern Sea Route. They’re also aligned with the strategic interests of China in the Arctic.
Arctic shipping offers China diversity, security and savings. Currently, China is highly dependent on oil imports from the volatile Middle East, which passes through the Malacca Straits in Southeast Asia, a potential chokepoint. Cities along the Russian Pacific coastline provide an alternative point for transporting goods, with major cities like Valdivostok and Khabarovsk located close to Northeastern China.
Approximately 85 percent of China’s oil imports passed through this passage in 2011. Given the source and route, combined with the lack of alternatives for China, this situation is neither ideal nor tenable in the strategic calculations of China and Japan. Arctic energy sources and shipping lanes provide attractive diversity and security for both, though Japan can always leverage on North American hydrocarbon sources due to a historically close military and political relationship with the US.
Arctic shipping substantially reduces transport costs, with the distance from Shanghai to Hamburg along the Northern Sea Route via Russia being approximately 30 per cent shorter than the comparable route through the Malacca Straits and the Suez Canal.
With a history of financial capital and human capital flows by Chinese migrants into the region, as well as the more recent capital flows originating from Japan, focused on infrastructure and hydrocarbon commodities (i.e. oil & gas), this might be a sign of more investments to come into the region from Asian investors.