High interest rates in Russia are making export contracts unprofitable, Sergei Chemezov, the head of Russian state industrial conglomerate Rostec, said on Tuesday, warning of production slowdowns and bankruptcy risks.
Rostec, which is making almost 80% of the weapons and equipment for Russia's military campaign in Ukraine, is set to generate revenue of more than 3 trillion roubles this year, Chemezov said last month.
Rostec is one of many Russian industrial companies and lobby groups to complain of prohibitively high interest rates in recent months. The central bank's key rate, currently at 21%, may be raised further in an effort to curb persistent inflation.
"With such a key rate, of course, it is just madness, any (export) contract becomes unprofitable for us," Chemezov said at a business forum.
Chemezov said that exports for products with a long production period in areas like aviation, air defence and shipbuilding may have to be stopped.
"Taking loans at such an interest rate means we will go bankrupt in a short period of time and will again come to the government with an outstretched hand and say, give us money to save our production," Chemezov said.
Chemezov, a close ally of President Vladimir Putin, acknowledged that the government is supporting industry with preferential loans and interest rate subsidies, but said these primarily apply to state defence contracts.
The central bank blames companies' slowing investment growth on labour shortages, not borrowing costs. Finance Minister Anton Siluanov responded to Chemezov on Tuesday, pointing out that the rouble, at a 32-month low against the dollar, should benefit exporters.
"I am not saying whether the exchange rate is good or bad," Siluanov said. "I am just saying that today the exchange rate is very, very favourable for exporters."
