(SBU) NIGERIA: RUSSIAN BUSINESS PRESENCE IN AFRICA

C O N F I D E N T I A L ABUJA 001820 SIPDIS DEPT FOR INR/OPS E.O. 12958: DECL: 10/01/2034 TAGS: PINR BBSR ECON EINV NI SUBJECT: (SBU) NIGERIA: RUSSIAN BUSINESS PRESENCE IN AFRICA RESPONSE(C-CI9-01825) REF: A. STATE 88241 ¶B. ABUJA 1171 Classified By: Charge Dundas McCullough for reasons 1.4.(C). IS THERE A RUSSIAN TRADE REPRESENTATION IN YOUR COUNTRY? -------------- -------------- ¶1. (SBU) The Russian Government, through its local Embassy representatives, is engaged with the Nigerian government on economic issues, such as nuclear energy, oil and gas, electric power, and aluminum smelting. ¶2. (SBU) Six agreements and Memoranda of Understanding (MOU) were signed during Russian President Dmitry Medvedev's visit to Nigeria. The agreements and MOUs were developed to boost the strategic partnership between the two nations. This was the first Russian presidential visit to Nigeria. The agreements and MOUs are in the areas of energy, metallurgy, oil and gas production and space exploration. Local press reporting on the presidential meeting included the pledge to increase the trade and economic cooperation between the two countries as well an effort to encourage contacts between Nigerian and Russian institutions, agencies, and companies. The six agreements and MOUs include the following areas: --Transfer of persons sentenced to imprisonment, investment promotion and protection of agreement (IPPA); --Cooperation in the field of nuclear energy for peaceful purposes; --Legal cooperation between the Nigerian and Russian Ministries of Justice; --MOU for cooperation of exploration of outer space for peaceful purposes; and --MOU and Articles of Association on a joint venture between the Nigerian National Petroleum Company (NNPC) and GAZPROM. WHAT MAJOR RUSSIAN COMPANIES OPERATE IN YOUR COUNTRY AND IN WHAT BUSINESS SECTORS? -------------- -------------- ¶3. (SBU) Russian company Gazprom is owned by the state and private sector investors. Gazprom and Nigerian state-owned oil company NNPC signed an agreement on June 25, 2008, to establish a joint venture (JV) on a parity basis. The JV is intended for executing large-scale projects in hydrocarbon exploration, production and transportation; construction and engineering of an associated domestic gas gathering and processing system; and building power generation facilities. The JV's total projected investment is $2.5 billion. (Note: Gazprom will target the domestic market first by assisting with the development of a gas collection infrastructure. Gazprom will then build the first segment of a gas pipeline from southwestern Nigeria northwards. It will then focus on exports, including the use of the EU-supported Trans-Saharan pipeline, should it be realized. NNPC may have trouble funding its share of the projected investment as it has a poor track record meeting its existing joint venture investment commitments with international oil companies (IOC) such as ExxonMobil, Chevron, Shell, and Total. These IOCs have a history of providing billions of dollars in bridge financing to plug NNPC-caused funding gaps in their respective JV companies. End Note.) ¶4. (SBU) United Company RUSAL (UC RUSAL) acquired a majority stake in the Aluminum Smelter Company of Nigeria (ALSCON) following the company's privatization in 2007. UC RUSAL took advantage of the most recent global commodities boom to expand its aluminum production capacity but the company is currently facing difficulties due to the impact of the global economic crisis. The Nigeria National Council on Privatization is investigating the acquisition and might recommend the termination of UC RUSAL's business presence in Nigeria due to controversies over UC RUSAL's takeover of ALSCON and its failure to Qcontroversies over UC RUSAL's takeover of ALSCON and its failure to meet the terms of the privatization agreement. (Note: U.S. BFI Group continues to challenge the sale of ALSCON to RUSAL, as BFI offered $410 million versus RUSAL's winning offer of $205 million in June ¶2004. End Note.) HOW MUCH REVENUE ARE RUSSIAN COMPANIES BRINGING IN? -------------- -------------- ¶5. (SBU) The value of bilateral trade between Russia and Nigeria is less than $300 million per year. Exports from Russia to Nigeria have grown from $75 million in 2003 to $282 million in 2008. Exports from Nigeria to Russia are trivial -- a mere $6.7 million in 2008. Metal-roll and home appliances were the lead Russian exports to Nigeria. There is a reported effort by the Russia-Nigeria Business Council to set up assembly plants in Nigeria where the currently imported machinery could be assembled in Nigeria. This would have the benefit of creating jobs and capacity in the manufacturing sector. Nigeria exported a small amount of raw agriculture products to Russia in 2008, including sesame seeds ($3.1 million),cashew nuts ($84,000) and ginger ($74,000). Oil and gas represents 95 percent of the dollar value of Nigeria's total exports. Bilateral trade is thereby limited both by the fact that neither country needs the other's oil and gas and the fact that Nigeria has little to export aside from that. HOW MUCH RUSSIAN INVESTMENT IS OCCURRING; IN WHAT SECTORS; IS IT GROWING? -------------- ¶6. (C) Most Russian investment in Nigeria is in the energy sector, specifically gas. If realized the planned large-scale projects would bring total investment into the billions of U.S. dollars, as noted by the number of signed agreements, specifically in the oil and gas sector (Reftel B). ¶7. (C) Russia is also investing in the agricultural sector by supplying tractors to boost agricultural production. The Russian government is reportedly willing to help Nigeria develop, but only through investment, not direct assistance. IS YOUR COUNTRY ACTIVELY SEEKING RUSSIAN INVESTMENT AND/OR RUSSIAN TOURISM? -------------- ¶8. (SBU) Nigeria is seeking Russian investment. Russia and Nigeria signed an agreement to cooperate in the construction of nuclear reactors and in the exploration for uranium in March 2009. In addition Gazprom signed an MOU with the New Nigeria Development Company (NNDC) to explore three oil blocks in the Chad Basin and Benue Trough in northern Nigeria. The NNDC is a venture owned by Nigeria's 19 northern states. These agreements predated President Medvedev's visit and the signing of six agreements and MOUs in June. ROUGHLY HOW MANY RUSSIAN CITIZENS RESIDE IN YOUR COUNTRY? -------------- ¶9. (SBU) This information is unavailable due to the lack of census data. Locally-based Russian businessmen have told Embassy officers that there is no significant Russian community in Nigeria. ¶10. (U) This cable was coordinated with ConGen Lagos. MCCULLOUGH