FRANCE: A STRATEGIC PARTNER OF RUSSIA

French economic interests in the fields of energy, aeronautics, high technologies, and transport, and, more generally, the potential of the Russian market justify strong a partnership.

France’s trade balance still shows a clear deficit (-€5.4b in 2007), despite a nearly 20% increase in French exports in 2007 (€5.6b, €4.7b in 2006). This growth is explained mainly by the increase in exports of consumer goods (pharmaceutical products and cosmetics), by the growth in automobile sales, and by strong performances in the chemistry sector. France meets growing consumption needs in the areas of luxury goods and household equipment well. However, it has more difficulties meeting the diversification needs of the Russian economy (equipment for hydrocarbon extraction, machine tools, in particular). At the same time, French imports grew nearly 10% compared with 2006 to reach €11b in 2007 (€10b in 2006) because of the increased energy bill (Russia is France’s second-biggest supplier of crude oil and natural gas).

Russia is an expanding market (its trade with the rest of the world grew 29% in 2006) and France doesn’t take advantage of this enough. With 3.9% of the market share in 2007 (4.2% in 2006), France is now Russia’s ninth-biggest supplier, after Germany (which holds 12% of Russia’s market share and which has had a surplus trade balance with this country since 2001), China, the Ukraine, Japan, the United States, Belarus, South Korea and Italy. Moreover, France is only the seventh-leading investor in this country, with about 500 establishments, after Cyprus, the Netherlands, Luxembourg, the United Kingdom, Germany and the United States.

Nevertheless, French trade is currently being rekindled by the completion of a certain number of key projects: Airbus sales, launch of SOYUZ in Kourou, Total’s participation in the exploitation of Shtokman, investments of Alstom, Renault and Peugeot PSA.

In mid-February 2008, Société Générale became the majority shareholder in the Russian bank, Rosbank, Russia’s tenth-biggest bank in terms of assets (€7.6b at the end of 2007), boasting the country’s leading private banking network (600 branches covering 80% of the Russian territory, 3 million private customers and 7,000 big businesses). This transaction, which is the biggest in the history of Russia’s banking sector (USD 1.7b), makes Société Générale the biggest foreign bank in Russia.

In addition, while Russia’s share in the total flow of foreign investments in France remains very low (0.16% in 2006), a certain number of capital-intensive projects became a reality in recent years.

In the luxury goods sector, the Hédiard (gourmet food) trade name was bought out in October 2007 by Luxadvor, owned by Russian businessman Sergei Pugachev, already present in banking, shipbuilding, the hotel industry and real estate through the family conglomerate, OPK.

Aeronautics

EADS/ Airbus: On June 20 2007 at the Bourget trade show, the Russian company, Aeroflot, confirmed its intention to acquire 22 Airbus A350 long range airliners soon, worth approximately four billion euros. In addition, cooperation agreements have been signed by the European aircraft manufacturer and its Russian counterpart, in particular concerning a relative risk partnership on the development of the A350 and the conversion of the A320 into a cargo aircraft.

Safran and Thales: The Russian regional aircraft programme (superjet 100), in which the companies SAFRAN and THALES are participating on the French side, has entered a decisive phase (first flight on 19 May 2008 and first deliveries scheduled for 2008). The potential customers are Russian as well as Italian.

Transportation Infrastructure

In September 2007, ALSTOM won a contract for equipping the rolling stock for the high-speed Helsinki-St Petersburg line and has just negotiated a partnership with the Russian group, Transmashholding, for manufacturing high-speed trains in Russia.

Energy

SHTOKMAN gas deposit: in July 2007, Total has a 25 percent stake in the Shtokman Development Company, the company which is to develop the 3.7 trillion cubic metre field. The rest of the company is controlled by Gazprom (51%) and StatoilHydro (24%). Faced with the need to address huge technological challenges, such as developing floating platforms, for when global warming unleashes huge icebergs, Gazprom badly needs Western expertise to develop the Shtokman field.

· GDF / GAZPROM agreement: Reinforcing a partnership that has been in place since 1975, this long-term agreement, reached in December 2006, calls for deliveries of Russian gas to France to be extended from 2012 to 2030. In accordance with the liberalization process, the Russian company should deliver a portion of the gas directly to the French consumers.
· Alstom / Atomenergomash: a contract signed on 29 June 2007 in Paris is creating a joint company for the manufacture of steam turbines for Russian nuclear power plants.
· Further cooperation between the two countries' electricity giants – Electricité de France and Inter RAO UES, as well as a series of projects in the transport sector.
· French companies Vinci and Bouygues will be building roads in Russie, while there are "big plans" for carmakers Renault and Peugeot in the country.
· Cooperation in the space sector, with French company Arianespace, the world's first commercial space transportation company, to buy ten Russian booster rockets. A launch of a rocket booster is planned for September 2009. Russia and France are looking for long-term cooperation in space with "a lot of French specialists already working in Russia and hundreds of Russian specialists working on French territory.