% of GDP
Soviet occupation following World War II led to the formation of a communist "peoples republic" in 1947 and the abdication of the king. The decades-long rule of President Nicolae CEAUSESCU became increasingly draconian through the 1980s. He was overthrown and executed in late 1989. Former communists dominated the government until 1996 when they were swept from power. Much economic restructuring remains to be carried out before Romania can achieve its hope of joining the
Update No: 075 - (28/07/03)
The Romanians are doing rather well, given the circumstances of a harsh transition to capitalism. Previously, in the 1990s they were very much the laggards in Eastern Europe in reform, outside the former Yugoslavia that is. But now under a former communist president, Ion Ilescu, and a former communist premier, Adrian Nastase, they are engaging in real reforms after all and at last arousing Western interest.
Pro-US line on Iraq
The core of Romania's foreign policy is now pro-Americanism. Bucharest unequivocally backed the US over Iraq, extending use of air bases and now forces for restabilisation efforts in the postwar situation. Even if this earned them a rebuke from Paris, traditionally a lodestar of Francophile Romania, this did not upset the Romanian government at all. The biggest prize may be the transfer of American troops from their 55 year old bases, in Germany, to new permanent bases in Romania and Bulgaria, now under active consideration.
The Romanians are eying the postwar Iraqi market, which they are now in a good position to exploit, being in the good books of the US. Indeed, the US corporate world itself beckons as great business.
US giant, General Electric, might consider Romania as the location of its headquarters for southeastern European business, Industry Minister, Dan Ioan Popescu, said during an official visit to Washington. "We've had talks on this issue as well as opportunities for partnerships involving Iraq reconstruction," Popescu informed a press conference after a meeting with GE Vice President for Europe, Ferdinando Becalli. Popescu also had talks with representatives of JP Morgan-Chase, Credit Suisse First Boston, Morgan Stanley, American International Group and Citigroup.
Russian overture; LUKoil to the fore
The Russians are not being forgotten either. President Ilescu is due to visit Moscow, when it is expected that he will welcome the participation of LUKoil in the privatisation of SNP Petrom. LUKoil is the flagship of Romanian-Russian commercial relations and would make Romania the base for its Balkan operations if it could acquire SNO Petrom.
Meanwhile, LUKoil officials have announced an impressive volume of investments for this year, irrelevant to whether it will participate in the privatisation. In particular, more than US$150m are planned to be invested for development projects in Romania.
According to President of LUKoil Downsteam SRL, Nicolae Ciornii, approximately US$96m will be allocated to the company's distribution network via the inauguration of 100 gas stations, while US$60m will be used for modernising the company's Ploiesti oil refinery, Petrotel.
At present the refinery is in the midst of major modernisation works, including the reconstruction of auxiliary installations for the production of steam and electric energy, all with a view to producing Euro-3 and Euro-4 fuels. The modernisation of Petrotel should finish in June 2004. "It will be the most modern such unit in the country, able to provide fuel and other petroleum products for the markets of Hungary, Romania and Bulgaria," he stated.
With investments over the last five years of approximately US$200m, LUKoil will realise revenues of about US$500m this year, Nicolae Ciornii estimated. "Following the resumption of activity at Petrotel, sales should reach US$1.5bn," he added.
The reintroduction of Petrotel into the economy after its prolonged period of idleness following its judicial liquidation, will necessitate the development of a petroleum distribution network.
For this reason LUKoil Downstream was created. Its present network includes more than 120 gas stations and eight petroleum deposits for provisioning.
Greeks to the fore
The Romanians are especially keen to develop ties with Greece - in many ways their lodestar, a fellow Balkan country with a maverick foreign policy in the Cold War, Orthodox in religion, yet the point of origin of the West and a member of NATO and the EU. Everything Romania longs to become.
Romania's newly liberalised market in the telecommunications sector has forwarded strong investment initiatives from the country's main operators. In particular, Greece's OTE International, the main shareholder of Romanian telecom operator, Romtelecom, recently stated that it contemplates investments worth up to 90m Euro this year in the country in a move to make its business more competitive in the face of the latest climate in the market. As the Greek telco leader noted, such a move would further secure its dominant position on the Romanian market.
"We are planning investment of 80-90m Euro in Romtelecom this year, but an exact figure will be announced by the end of June," OTE's CEO Lefteris Antonacopoulos said at a recent meeting with Romanian journalists. OTE International became Romtelecom's main shareholder earlier this year, following the acquisition of a 34 per cent stake in 1999. "We want to see Romtelecom more competitive and our aim is to maintain its dominant position on Romanian fixed telephony market," the Greek CEO noted. Romania liberalised its fixed line telephony market in January 2003, creating room for competition in a market dominated for more than a decade by a Romtelecom monopoly. Antonacopoulos added that Romtelecom's results for the first quarter of the year had improved, indicating that EBITDA margin rose to 30 per cent compared 24 per cent in the same period a year ago. Antonacopoulos refrained from disclosing other financial data, yet assured that Romtelecom management would present them soon. OTE perceives Romania as a market with the highest growth rate in the Balkans with broader opportunities of business once the country would be integrated into the European Union.
Romanian state plans to preserve one-third of oil company's shares
The Romanian Ministry for Economic and Trade Affairs (MEC) has unveiled a strategy plan for the privatisation of the Petrom National Oil Corporation, the largest Romanian company, that provides for the Romanian state preserving an important stake in Petrom, the daily 'Adevarul' reported on 30th June.
Head of the Office for Industrial State Shareholdings and Privatisation Doru Laurian Badulescu says that the privatisation of Petrom might be achieved in two stages: direct sales of 30-40 per cent of the Petrom shares followed by a capital increase that will allow the buyer to hold a 51 per cent stake in the company.
The role of the state would be to preserve the ownership rights over 34-35 per cent of the Petrom shares for an unspecified time. The papers quotes Badulescu as arguing that the presence of the state among the shareholders will be to keep control over the buyer to see how the buyer meets the pledges for investments in the upgrading of the company, environmental protection and social measures.
The government is expected to look into this version and take a final decision in a resolution.
Badulescu says that the International Monetary Fund and the World Bank will agree with this version of the privatisation as this is the best way of turning Petrom private.
The daily Adevarul also carried a detailed assessment of the SNP Petrom business results unveiled by Petrom General Manager, Gheorghe Constantinescu.
According to the assessment, Petrom has produced 31m tonnes of crude oil and 29bn cubic metres of natural gas in its five years in business. The investments performed by the company in oil drilling and production facilities stand at US$1.195bn, while the investments in its two refineries Arpechim and Petrobrazi total US$225m.
Petrom currently holds a 55 per cent share in the distribution market, up from 30 per cent five years ago. In 2001, the company released the first eco-friendly oil products in Romania and posted a 40 per cent rise in its sales of eco-friendly petrol.
Hidroelectrica to launch new Eurobonds in 2004
Romanian hydropower producer, Hidroelectrica said it would launch a Eurobond issue worth up to 150m Euro next year to raise funds for a restructuring proposal. The documentation of the projects to be financed will be finalised by the autumn, Investromania reported.
Initially Hidroelectrica planned to launch the 150m Eurobond issue in 2002, but unfavourable market conditions prevented the company from entering the international capital markets. Hidroelectrica is now looking for a company rating from an international rating agency to pave the way for the planned Eurobond issue.
Last year Germany's USB, Deutsche Bank, US-based JP Morgan and Austria's Triple-A lodged offers to handle the Hidroelectrica bond issue.
FOREIGN ECONOMIC RELATIONS
Romanian president wants revival of Romanian-Russian economic deals
President Ion Iliescu pleaded on 3rd July, at the opening of the Romanian-Russian Businesspeople Forum for a relaunch of the economic ties between Romania and the Russian Federation, especially since the present time is a favourable moment for this development, Mediafax News Agency has reported.
Iliescu said that in the last decade of last century the bilateral economic ties have known a slowdown, both from objective causes and from subjective ones, which have generated certain types of blockades, both in Bucharest and in Moscow.
"One could say that we forgot the value of pragmatism and of realism in our relationship, in a moment when these approaches were more than necessary." said president Iliescu.
The head of the Romanian state pointed out that from statistical point of view the dissatisfaction expressed by both sides in connection with the development o economic relationship could seem unjustified. He said that this dissatisfaction is fully justified, if one could refer to the bilateral exchanges, except for the oil and natural gas.
Ion Iliescu mentioned that Romania's exports to Russia amounted in the year 2002 to US$40m, "which nears the level of Albania." He also said that the deficit of economic balance becomes "unsustainable" for Romania.
President Iliescu also said that the field of investments bilateral relations is not satisfactory, at present only 208 Romanian-Russian companies are registered.
The president estimated that for a relaunch of the economic relationship one must start with the following steps: normalization of political relationship, better knowledge of what is on offer in the two states, including in the field of tourism, completing of the institutional and juridical framework and of bilateral relationship.
"Romania is ready to do everything it depends on it to create the conditions necessary for the development of a relationship with Russia in all matters," said
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