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Tom Balmforth, Russia Profile

Tom Balmforth, Russia Profile

MOSCOW, September 7 (RIA Novosti) - The...

MOSCOW, September 7 (RIA Novosti) - The Russian automotive industry is to receive $2 billion in foreign investments within the next two or three years, but experts warn current policy may put it at risk, a respected business daily reported Wednesday. Vedomosti wrote that Trade and Economic Development Minister German Gref believed that the automotive industry was thriving because of a decision to reduce import duties on foreign car parts. He said four investors were ready to sign investment agreements and another six were in negotiations. A ministerial official said Gref was referring to investment agreements with the Avtoframos Russian-French joint venture, and Severstal-Avto and IzhAvto, which both produce South Korean cars. Overall investment now respectively total 230 million euros, $75 million and $90 million. Toyota has already started building a plant in Russia and will also sign a similar agreement soon. Gref estimated this investment at $1 billion this spring, the paper said. Vedomosti quoted Yelena Sakhnova, a market watcher with the United Financial Group, as saying that carmakers were planning to earn more on foreign, rather than Russian, models. "For instance, EBITDA at AvtoVaz (Earnings Before Interest, Taxes, Depreciation and Amortization) totals 10.4%, whereas companies assembling foreign cars in Russia earn at least 15%," Sakhnova said. According to the paper, easy-term customs clearance makes this business even more profitable. IzhAvto earned just $4 million in 2004. By assembling KIA Spectras, it hopes to make $200 million in net profits in five years. Since 2002, $1.15 billion has been invested into foreign-car assembly projects in Russia. A partnership between American giant General Motors and domestic producer Avtovaz had invested $338 million by the time it opened a plant and then pumped in another $195 million, the paper reported. The paper said that experts had warned about potential risks with the government"s current auto-industry policies. Alexander Agibalov, the managing director of AG Capital, told the paper: "China once had big tax breaks, but the policy created large concerns and one-day companies. The latter used the privileges they were entitled to and then curtailed production. The problem is knock-down assembly does not require major investment."

Russia is fully committed to completing...

Russia is fully committed to completing the construction of Iran"s first nuclear power plant on schedule, Russian Foreign Ministry spokesman Andrei Nesterenko said on Thursday.