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«    June 2017    »

Kerch Bridge: a scandalous project

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Kerch Bridge: a scandalous project

“Stroygazmontazh” and the Ministry of Construction cannot agree on financing the project.

Another scandal has come about regarding the Kerch Bridge. This time, the project finance’s stability is in doubt.


The scandal in the media arose after Forbes’s publication on June 8th of the fact that the construction has stopped being financed. The edition referred to the letter from the Director General of the “Stroygazmontazh” (SGM) company-contractor, Andrei Kirilenko, to the Ministry of Transportation (Mintrans) and Rosavtodor GC.  

The institutions’ press-offices reacted quickly, claiming there were no problems with the financing. What’s going on? Hardly had the “Crimean Bridge” information center reported that the 1,000th pile had been driven into the foundation of the Kerch Bridge, when information that further work had become impossible appeared in the media.

Kerch Bridge: a scandalous project

It turned out that Mr Kirilenko had actually written a letter on the problems of financing the construction of the flyover across the Kerch Strait. The letter was sent to the First Deputy of the Minister of Transportation, Evgeny Dietrich, and the Head of Rosavtodor, Roman Starovoit, on May 27th. He wrote to the high-ranking officials that, due to the absence of money, the enterprise was not able to keep up the rate of construction and needed to invest money in the necessary equipment. According to Kirilenko, the authorities had not been able to solve the problem of financing since the beginning of the year - money was last transferred to SGM in December, 2015.

All in all, the company has received 48.9 bln roubles, and this year it was due to reach 65.4 bln roubles. The reason for the payment delay, as determined by Kirilenko, is the peculiarity of the bank and planned fiscal support. It should be mentioned here that to exclude the non-purpose use of the budget finances, all statutory construction projects have been switched over from extended banking servicing to treasury banking. The same concerns have arisen over the project of the Kerch Bridge construction.  

However, according to TASS, the Ministry of Transportation rejected the idea of financing problems.

– The money for the project’s implementation in 2016 has been allotted from the federal budget, the ministry claimed. – The expenditure of the money will start after the state contract is switched over to treasury servicing. The corresponding documents have been sent to the RF Government for consideration. The amendments will be approved by the end of July.

Kerch Bridge: a scandalous project

Rosavtodor, according to Mintrans, has affirmed that all the calculations have been agreed upon in the contract. –Work financing is being carried out according to the conditions of the above-mentioned contract. Any problems connected with the construction financing of the bridge across the Kerch Strait are false, snapped the agency.

Whatever may be the case, there was a great to-do. Journalists even came at the press-secretary of the RF President, Dmitry Peskov, who said that he knew nothing about these problems.  However, he stressed that the project is under the President’s tight grip.  –Even if there are some wrinkles, they will be no doubt smoothed over as soon as possible, Mr Peskov claimed.

On June 8th our editorial team sent a letter to the “Crimean Bridge” information center, asking for them to comment on the situation. In their reply, with reference to the FSI “Taman” Federal Automobile Roads Department of the Federal Road Agency, they said that the construction of the bridge across the Kerch Strait was being kept to schedule. The work is developing, the supports are being constructed, the equipment and employees are working. Not a word was said about financing or any problems with the authorities’ representatives. So everything is good… It's beginning to feel like all this ado is to attract attention to the statutory project having developed some level of complexity.  

At the same time, we think that the leakage of the letter to the liberal Forbes came from within federal structures; from “Stroygazmontazh”, most likely. The aim is evident: to attract attention to the necessity of a fast solution to the problem of switching over to treasury financing.  

But if past experience is anything to go by, changing the game’s rules (including the financial rules) during the course of the game itself may mean trouble.

We’ll follow the financing of the Kerch Bridge construction attentively.



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