Ikuo Kasama, Mitsui: ‘Key of success in Russia is the choice of a partner’
The delegation of the Japanese holding company Mitsui, operating in 66 countries around the world, has visited Kazan. Today, the group runs business in 14 areas and for the expansion of one of them – petrochemistry – the holding representatives held meetings with the key partner – the companies of TAIF Group. What the range of interests of the trading and investment company in Tatarstan is, what the greatest difficulties arise when doing business in Russia and how that sanctions have an indirect impact on the Japanese holding — in the interview of Realnoe Vremya with the managing director for industrial projects in Europe, Russia, the CIS countries and the Middle East Ikuo Kasama.
Mitsui has invested in Russia $ 3 billion
Mr. Kasama, what is the current Mitsui investment volume in Russia? What are the priorities of the group of companies in Russia now?
The total investment volume in Russia amounts to $ 3 billion. For Mitsui, Russia, of course, is a very important market. Historically, Japan was the technology provider for the production of fertilizers – they have supplied about 60 plants for the production of ammonia and urea. The Mitsui company has developed great business relations with Russian companies and now we want to expand them: to be engaged not only in the supply of technologies for the production of fertilizers but also in the projects in the field of petrochemistry, energy, raw materials.
Are you talking about the creation of new enterprises in these areas?
Mitsui is a trading company, not a manufacturer. We do not have our proprietary technologies. One of our main functions – the coordination between manufacturers, licensors, engineering companies and the entry to foreign markets with own investments. At the same time, Mitsui has numerous branches in aerospace industry, chemical products, information technology, energy.
What projects with Mitsui participation are the largest ones in Russia today?
One of the largest investment projects in Russia – 'Sakhalin Energy' – on the extraction of crude oil and natural gas on the Sakhalin shelf and on the production of liquefied natural gas. We participate in this project together with Dutch-British company Shell and Gazprom. In addition to the energy projects, there are less large ones in other areas.
Is it the energy direction that yields the greatest profit in the revenue structure of the company in Russia?
Not only. In Russia and in Tatarstan there are oil and gas. It is these areas that may have the greatest development and economic effect.
One of the largest investment projects in Russia – 'Sakhalin Energy' – on the extraction of crude oil and natural gas on the Sakhalin shelf and on the production of liquefied natural gas
'It is unlikely that we could create here 100% our company'
The Toyo company, which belongs to the Mitsui group, is the designer of the VCC basic plant at TAIF-NK. What are the prospects of the project of Oil Conversion Complex, in your opinion?
It is a great project that gives an opportunity to expose the oil residues to cracking, now they are just burnt as fuel. Technology is very advanced but experience is still a very important. After gaining it, TAIF-NK is going to play a big role in its spread, as the global companies will be interested in its assessment of the technology. So, TAIF-NK will be able to ensure the distribution of the technology among the companies of Tatarstan, Russia and all over the world together with Mitsui.
Are you planning to participate in the dissemination of TAIF experience in the businesses around the world?
We could do that.
You have stated the interest in participating in the implementation of another major project of TAIF – the ethylene complex Nizhnekamskneftekhim. In what areas would you like to participate?
We would like to participate in the construction of plants for derivatives of polymers and we can support off-taking the products through our chemical department. So, Mitsui expresses interest not only for ethylene but also for the further processing of the products of the ethylene complex. We are ready to share our knowledge. We are also ready to present the potential producers and the holders of different licenses. In this aspect, we would like to expand our cooperation.
Do you prefer to create your own business when investing or to form a joint venture in these countries?
Case by case, depending on the business environment and relationship with clients and/or business partners.
In Russia too?
Yes, it is unlikely that we could create here 100% our company. I believe that there are a lot of business chance in Russia since Russia has huge natural resources, such as oil and gas. Under such circumstances, in the case of investment to the project in Russia, selection of reliable partners, with whom role of project will be shared, is most important.
Mitsui expresses interest not only for ethylene but also for the further processing of the products of the ethylene complex. We are ready to share our knowledge
'The effect of sanctions is felt when it comes to financing'
How do you assess the financial results of the company for the previous year?
Last year we invested in oil and gas project. As the oil price fell sharply, the cost of these assets fell significantly as well. In the past year, though cash flow was positive, the company's net profit by results of financial statements was quite low. Still, Mitsui focuses on oil and gas projects – the oil price had a direct impact on our performance.
Have the sanction had the impact on your joint work with Russian companies?
Yes, but not directly. The company Mitsui specifically has no problems but the effect of sanctions is felt when it comes to financing. If the company is in the sanctions list, some banks refuse to finance. In the first place, it has affected the American companies, of course.
So, has the number of companies with which you can start a joint production has also decreased?
I do not think so. Still many companies have interests in Russian market. However, difficulty for arranging finance is increased due to sanctions.
You said that it has become more difficult for U.S. businesses to work in Russia; do you see the increase in opportunities for your business?
Yes, we see that we can increase the volume of work in Russia, the situation is favourable.
Are there other Japanese companies that are planning to enter the Russian market, given the current situation with the sanctions?
Many companies consider entering the Russian market. But this is a complex issue. On the one hand, there are incentives such as lower taxes and resource prices. It all serves to motivate. But there is another headache – currency, the rate is very unstable. In recent years, the ruble has dramatically changed. When doing business in Russia, respectively, the income revenue will be in rubles. But we, as a Japanese company, would prefer to get revenue in yens. Therefore, it is difficult to predict the prospects on the Russian market for Japanese companies.
Mitsui focuses on oil and gas projects – the oil price had a direct impact on our performance
The planning horizon in Russia is 1-3 years
You said that it is difficult today to plan a business in Russia. What is the planning horizon of Mitsui here?
This is largely, of course, depends on the direction. Of course, you should have in mind the picture for the next 10 years, but it is very difficult. When the sanctions, for example, are lifted the market will change. So, depending on the scope of business, the planning horizon can be different. In general, in the company it is accepted to declare a planning horizon for the next year and for the next three years.
The Russian companies also plan for the same period. For Mitsui, the company with three hundred years history and the established traditions, it must be difficult to change according to the Russian realities? What other traditions can't be preserved in Russia, what are the differences?
In our company, like in other Japanese ones, the employees usually work until retirement age. The most important thing – reliability and trusty. Our experience and knowledge go from senior mentors to young employees. It always has been that among new employees are mostly young people. Just for some jobs we prefer to take people with experience of sometimes over 10 years.
In addition, we, Mitsui, created good relationship with other companies, not only in Japan but also in the world including Russia, through experiences of many past businesses for a long period.
I believe that such relationship of mutual trust can create new business in future.
At the business forum 'Tatarstan – Japan', the head of Investment Development Agency of the Republic said that the Japanese are tough negotiators. Perhaps, you have heard such thing about yourself before. What line of conduct do you adhere to during negotiations?
Actually, I don't know exactly what was said. But I do not see any peculiarities. The only difficulty is to communicate through an interpreter (laughs). And I would like to say about Tatarstan — that it is a good place for investments. It is obvious that the Republican authorities provide opportunities for investments, even through tax benefits.