Azernews.Az

By Bloomberg

Russia is set to commit an estimated $800 million to China’s new development bank, seeking to reap the benefit of membership by getting infusions of capital to overhaul its infrastructure, the Finance Ministry said.

Russia’s contribution to the Asian Infrastructure Investment Bank will correspond to its share in the region’s gross domestic product, Deputy Finance Minister Sergey Storchak said in an interview in Moscow. Shareholders will have to agree on the period of time needed to make their investments, according to Storchak. The AIIB will be authorized to lend up to $100 billion, though initially its subscribed funds, which include paid-in and callable capital, will be $50 billion.

“The problem of financing infrastructure is a problem not only for us but for many countries in the region that have active trade with China,” Storchak said. “This is less of an issue for China and more for its numerous trade partners.”

Russia, struggling to reverse net capital outflow that reached a record $151.5 billion last year, faces a shortage of financing to rebuild Soviet-era roads, ports and energy assets that are shackling development in the world’s biggest country by area. Chinese President Xi Jinping announced plans to form the bank in October 2013, with plans to complete its charter by June and have the lender running by the end of this year.

More than 40 countries have signed up as founding members, including Germany, the U.K., Australia and South Korea. Russia’s First Deputy Prime Minister Igor Shuvalov said last month that President Vladimir Putin approved his nation’s membership. So far, the U.S. and Japan are the only Group of Seven holdouts to the initiative.

Ports, Railways

Russia’s sea ports and railway projects, especially near recently discovered deposits of natural resources, may be among the first candidates to apply for funds from the development lender, Storchak said.

The availability of credit from banks such as the AIIB will offer “very good help” for Russian companies, Storchak said. “It’s always comfortable for businesses to have alternatives from the point of view of funding sources.”

Sanctions over the conflict in Ukraine are limiting access to foreign markets for borrowers, pushing Russia into a 14-month slump in investment and battering an economy on the verge of its first recession in six years.

The government estimates that fixed-capital investment will shrink 13.7 percent in 2015, while net capital outflow may reach $115 billion.