(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?
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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?
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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?
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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?
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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?
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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?
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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