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Russian state firm signs $9.1bn loan deal to fund nuclear plant in Turkey

Rosatom, which has been wiring money to Ankara to shore up Turkey’s depleted foreign currency reserves, signs deal with Gazprombank
Russian President Vladimir Putin gives a thumbs-up as he attends a foundation-laying ceremony for the third reactor of the Akkuyu nuclear plant in Turkey, via a video link in Moscow (Reuters)
By Ragip Soylu in Antalya, Turkey

A Russian state-owned company signed a $9.1bn loan deal with Gazprombank in August to fund the construction and development of Turkey's Akkuyu nuclear power plant, according to the official documents. 

In a public announcement on Wednesday, Rosatom Corp published the deal signed on 3 August, which opens a line of credit to finance Akkuyu Nuclear JSC, its subsidiary in Turkey.

The official documents suggest the money would be used for the following:

  • $7bn for construction and operation of a nuclear power plant at the Akkuyu site, including four power units with VVER-1200 reactors
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  • $1.6bn for financing the acquisition and development of a uranium deposit in Kazakhstan
  • $500m for financing expenses for the acquisition and development of lithium assets

The draft deal published in July included a special section suggesting that the intended use of the credit line would be "temporary placement in deposits, purchase of dollar bonds of the Ministry of Treasury and Finance of the Republic of Turkey". 

However, the final deal doesn’t specify such a condition but only says the loans would be temporarily placed in “an account that will be pledged in favour of the lender”.

This still opens the way for Akkuyu to purchase Turkish treasury dollar bonds or deposit them in the treasury and pledge them to the lender.

The privately owned Gazprombank, which is headquartered in Moscow, still has access to the Swift international payment system, which Russia was kicked out of after the invasion of Ukraine. This means the bank could wire money to Akkuyu’s dollar and euro account with the Turkish state-owned Ziraat Bank.

Bloomberg reported last month that Rosatom had decided to wire $15bn to Turkey for the construction of the $20bn Akkuyu nuclear power plant, citing officials who said that an initial $5bn had already been received.

The officials suggested the move was a goodwill gesture by Russian President Vladimir Putin to thank Turkey for the breakthrough Ukraine grain deal brokered by Ankara in July.

The Turkish central bank’s gross reserves increased by $7.4bn during the week ending on 5 August, the biggest increase in 12 months, according to data from the monetary authority. That is the same date Gazprombank signed the deal with Akkuyu.

The Turkish government is in dire need of foreign funding as a result of its rapidly evaporating foreign currency reserves.

Rosatom is expected to rapidly spend up to $2bn on overdue payments to subcontractors. The company told Bloomberg that it would indeed transfer some funds to Turkey, but an amount much lower than that declared by Turkish officials.

The power plant is slated to satisfy 10 percent of Turkey's energy needs when fully operational in 2026.

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