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Last Updated: Monday, 16 July 2007, 04:48 GMT 05:48 UK
Russia revives links with Africa
By Alexander Koliandre
BBC Russian Service

Russia set its sights on Africa several centuries later than other European countries. But it no longer wants to miss its chance.

Russian President Vladimir Putin with Ghanaian President John Kufuor at the G8 Summit in Heiligendamm, Germany, in June 2007
There is hardly an African country that Russia has not approached

Moscow's love affair with Africa began in the 1960s and reached its peak at the beginning of the 1980s.

This was the time when the USSR was ready to provide all kinds of help - from building factories to military aid - in exchange for an anti-American stance.

The Aswan Dam on the River Nile became a symbol of that first love affair, while hundreds of thousands of Africans acquired Soviet academic degrees.

But in the 1990s, Moscow's attempts to persuade the West's former colonies to follow the socialist course of development became history, together with the Soviet Union itself.

At that time, it seemed that Russia forgot all about sub-Saharan Africa and the continent as a whole.

Low prices for raw materials, devastating droughts, bloody conflicts and corruption have earned Africa the nickname "the lost continent" in Russia.

At the beginning of the new millennium, the situation started to change. Following the example of their Western counterparts, Russian companies moved into Africa, and not just to sell weapons.

Minerals and money

"In recent years, Africa has become very visible in Russia," says Anna Brazhkina, editor-in-chief of New Africa magazine.

"It would be difficult to find an African country that Russian companies have not tried to co-operate with. This is almost tantamount to an expansion, although it is not quite an expansion."

According to rough estimates, the investments of four companies alone - Rusal, Nornikel, Alrosa and Renova - in Sub-Saharan Africa constitute about $5bn.

Others are also active, including metal group Evraz, oil giant Lukoil and a number of banks.

Many African leaders are graduates of Soviet universities
Igor Yurgens, Renaissance Capital Bank

The Russian firms that are particularly active in Africa are those involved in exploration and production of mineral resources - known as "upstream" companies.

However, they face tough and constantly-growing competition.

"All upstream companies are active here," says Mark Buzuk, project manager for Africa at the Renova group, a Russian partner of BP.

"There is a number of the so-called 'juniors', set up by groups of former top managers. They are looking for money, whatever its national origin.

"Other players are active too, the so-called 'majors' who have plenty of experience. The Russians are waking up to it. The Chinese are undoubtedly very active here, pursue different interests, and are involved in lots of things."

Raw materials

Renova is one of the most dynamic Russian players in Africa. Its largest African project is the development of a manganese deposit in the Kalahari Desert.

Renova's head, Viktor Vekselberg, member of the International Investment Council for South Africa, is known to local journalists as Mr South Africa in Russia.

So far, according to Anna Brazhkina, Russian companies in Africa are interested mostly in raw materials, rather than investment in infrastructure projects. But, to all appearances, this could soon change.

Lukoil headquarters in Moscow
Lukoil is among the many Russian firms active in Africa

Rusal, the leading producer of aluminium in Russia and the second-largest in the world, is maintaining its presence in Africa despite the kidnapping of six of its staff in Nigeria in June.

Aluminium production, like so many other foreign projects in Africa, is extremely energy-intensive.

Yet 92% of its rural population and 42% of the urban population do not have access to uninterrupted energy supplies.

"When the energy situation stabilises, other projects will follow, such as telecoms and mining," says Igor Yurgens, chairman of the board of directors of the Renaissance Capital Bank and former vice-president of the Russian Union of Industrialists and Entrepreneurs.

"Russia is unlikely to undertake mega-projects, such as the Aswan Dam, but its nuclear energy expertise could prove useful. By helping Africa, we are also helping ourselves."

Risk and reward

Russian banks are also moving into Africa. The Vneshtorgbank has opened the first Angolan bank to have predominantly foreign ownership.

In the meantime, the Renaissance Capital already owns 25% of the shares in Ecobank, one of the most advanced Nigerian banks, with branches in 11 African countries.

The Renaissance Bank is actively promoting the idea of Russian investment in Africa and is even about to launch an African investment fund.

Today, the risks of epidemics, corruption and wars scare Russian investors in Africa. But they are getting used to the idea that these problems are not going to just go away in the near future.

Mark Buzuk thinks that rumours of corruption in Africa are vastly exaggerated. But many analysts think that the lack of transparency in African business often helps companies from those countries where bribing foreigners is not punished by law.

"The USSR used to be an important player in Africa," says Igor Yurgens. "The Soviet Union put an emphasis on grand industrial projects and helping the developing countries in their fight against imperialism, but in the process we built a broad network.

"Thus, for example, many African leaders are graduates of Soviet universities."

But Anna Brazhkina thinks that old connections will be of little use: "Russian companies know very little about Africa and attach too much importance to old ties and old friendships."

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