Chapter 669 - An Unexpected Variable(1)
Chapter 669: An Unexpected Variable(1)
Youngho and Mittal’s group arrived in Krasnoyarsk. They toured the right site for the steel mill and sailed along the Yenisei River to the tundra area, checking the transit distance between the iron ore producing area and the steel mill.
The mafia boss, Sergeenko, made all the visit schedules arranged perfectly, leaving only a tour of the Yenisei River when Youngho was about to leave for Moscow.
“Your Highness, I hear that Sergeenko is the mafia boss. Is it safe to be seen working with him?”
“Here, the mafia acts like the cop.”
“What? You mean the mafia is in charge of security?”
“Hahaha… Well, you can’t actually say that, but the mafia clears the gangs and scumbags in the back alley. Have you heard of the Russian mafia?”
Although Mittal was a world-renowned businessman, he did not seem to know about the Russian mafia.
In Russia, the mafia was in charge of maintaining order in the blind spots that the police could not take care of. It was to prevent any disadvantage and chaos from any disorder in the back alley.
“I knew it was affecting the Russian economy, but I’ve never heard of it replacing the police.”
“I’m not disparaging the Russian police, but there are some areas where they’re worse than the mafia. There are cops who rob ordinary citizens and tourists.”
Mittal nodded his head.
Most of the places where Mittal’s steel mill was located were in developing countries, so he knew how corrupt local police and officials were.
In order for the steelmaking business to run smoothly, he had to bribe countless officials from top to bottom.
“Is the Mafia involved with the Kazakh royal family in Krasnoyarsk?”
“No, but the mafia is controlled because we do business together. Sergeenko’s organization is working in a legitimate way. It is correcting the order in the back alleys. If there’s anything difficult for your business, it’ll be easy for you to solve through Sergeenko.”
“I would be relieved if the mafia is controlled, so through Sergeenko, can we also get meteorites or diamond stones?”
“It is possible, but you should refrain from buying too much to break the black market order, and you shouldn’t even be thinking about mobilizing people to dig through the forest. That’s why the Chinese company was kicked out.”
Youngho warned Mittal to prevent him from acting greedy.
Kazakhstan-based Mittal’s steel mill had also suffered from environmental pollution for some time, so he would understand what Youngho’s words meant. He knew that Youngho would not allow any business to damage the environment harshly.
“I won’t be overambitious because I only need to meet the little pleasures of the collector. My purpose is to build a steel mill here, not to collect stones.”
He seemed to comply in front of Youngho, but Youngho did not believe it. There was no end to one’s greed. Since he had given Sergeenko his word in advance, Sergeenko would only make a deal within appropriate levels.
“There’s no way we can get our hands dirty here because they do the dirty work for us.”
“That’s what I wanted. Then I’ll have to give Sergeenko a job related to the steelmaking business.”
“Sergeenko would appreciate it. I’m leaving for Moscow tomorrow, so I want you to work out the rest of the schedule as planned. There will be an icebreaker waiting to guide you and your party to the Yenisei River.”
“Your Highness, thank you for giving me this opportunity. I hope I’ll do a lot of work in the development of Kazakhstan and India.”
“I look forward to your role. I hope you have a pleasant trip.”
The Yenisei River had a regular arrangement of icebreakers belonging to the Kazakh royal family now.
Now residents of Krasnoyarsk did not have to worry about the river being frozen in the winter as the royal icebreakers were frequently breaking the ice on the Yenisei River.
As a result, the vicious cycle of rising prices due to seasonal factors had disappeared this winter.
Thanks to the icebreaker’s performance, the flow of water in the Yenisei River was maintained like it was summer.
It was only possible because the logistics of the Trans-Siberian trains were dispersed into the water route of the Yenisei River.
With the introduction of icebreakers, residents received daily necessities and food supplies at a price comparable to when it was summer, which made them praise the Kazakh royal family.
The reason why the icebreakers were put into service despite the fact that the Siberian development project was not in full swing was to sign the contract in favor of the royal family.
The service was intended to make the people feel how the Kazakh royal family’s investment in Krasnoyarsk province was affecting them positively.
***
Martin, president of Spain’s ACS Corp., was waiting for Youngho at the Moscow Airport.
“You could’ve waited at the hotel, why did you come all the way here?”
“Oh, of course, I should come out to greet you at the airport. I’m here on behalf of the consortium companies.”
It did not seem right that he had come out on behalf of all the companies.
Since the trip to Moscow was an official visit, Russian officials were already at the airport to greet Youngho, so he did not have to come out.
“Is there a problem?”
“It turns out that the amount of the project would be much more than expected. Russian media have come to the airport, and I wanted to make sure to give you a heads-up to prevent any misunderstanding and rumor. I think we should talk in-depth with the consortium companies and then make an announcement to the press. The priority is to persuade them.”
“I see. The participating companies are faltering.”
“It’s a little serious.”
This was exactly what Youngho was worried about.
If construction costs were exorbitantly higher than the amount proposed by the Russian government, companies that lacked funding would give up, which turned out to be the reality.
“Is there a company that is willing to abandon the project?”
“Some companies are worried about the lack of funding.”
“Then we should put some pressure on the Russian government.”
“It won’t be easy because of Russia’s economic conditions, but it’s still a problem for the Russian government to share some of the construction costs. If the Russian government were to participate in the operation of the Trans-Siberian train, there would be no stopping it. This will also disrupt the recovery of principal and operating profits. I don’t think there’s a company that would like that.”
Youngho felt frustrated.
If the Trans-Siberian Railway Project slowed down, the Siberian development project would also face difficulties.
After finishing the diplomatic event at the airport, he hurried to the hotel where all the representatives of consortium companies were waiting.
He called representatives from Spain, the United States, and France, the most heavily invested of the consortium companies, to the conference room.
According to the report, the cost of the project, which was calculated as a result of the due diligence, amounted to 10.5 billion dollars, not 6 billion dollars that Russia had originally proposed.
Large companies were also burdened by the scale far exceeding their initial expectations.
“The Russian government’s initial survey was so bungled.”
“I didn’t trust the Russian government’s data from the beginning either.”
“We cannot rule out the possibility of further increases in business expenses in the future.”
Everyone seemed upset, so they were pouring out their thoughts at once.
“Please calm down and listen to me. I came up with a resolution urgently. Why don’t we divide the railway sections and build them sequentially?”
“Will the Russian government agree?”
“I will take responsibility and persuade the government. First of all, let’s set the first section of the project that’s close to the original construction cost and proceed with the construction. Roughly speaking, it would include the Far East Siberian section and parts of Central Siberia.”
“That will cause another problem when the Far East section is modernized. If you get bottlenecks on the rest of the sections, it will be a useless business.”
“Not really. Since there are many industrial parks on the Central Siberian route, the Russian government has improved the railroad. There are many branch lines from there, so I don’t think it will have much impact on logistics. Let’s also study ways to reduce the cost of first section construction. The cost is still not confirmed yet just because you’ve done due diligence, isn’t it? There may be variables in the actual construction. If we can reduce construction costs in the first section, we can start the second section early.”
Youngho was also in a hurry and was offering whatever came to his mind, but it was a reasonable suggestion.
This was because Youngho knew Russia better than anyone who was there. Besides, there was no reason for the Russian government to oppose the idea of dividing the construction section as it was only paying ten percent of the cost of the project.
“Your Highness, your method will do the trick, but what if the Russian government takes this opportunity to interfere with the railway operation?”
“The Trans-Siberian Railway has a structure that allows companies with more stakes to have more control over it. We’ll sign the contract to ensure that, so don’t worry.”
“Your Highness, the Far East Siberian section is the most expensive part of the project. At least seven billion dollars should be spent. I’m not sure if we can afford the secondary construction after spending such a huge amount.”
He had a point.
The cost of construction increased but not diminished.
Siberia was an extreme environment in which many variables were lurking.
After agonizing for a while, Youngho came up with a new proposal.
“Then let’s put it this way. How about dividing the sections between the Russian government and the private sector? The consortium can be in charge of the construction and operation of the sections to the Krasnoyarsk section and the Russian government can be in charge of the rest. Then the Russians wouldn’t be disappointed either.”
“Is the pride of the Russian people so important?”
“Yes. Russians should never be judged by common sense as we know it. All they have is pride.”
If that were to be sorted out, the plan to run the Siberian railway project for only ten years could change. The reason for pulling out of the railway project only after ten years was because the pride of the Russian government and the Russians was at stake.
How many Russians would love to have the Trans-Siberian Railway in the hands of foreigners?
However, if that was resolved, there was no reason to back down early.
“Do you mean we should divide sections and run them separately? Will the Russian government accept it?”
Hope was in the eyes of the participants.
“Strictly dividing the private and government zones will rather be a competition of good faith, and service may get better. The Russian government has self-respect and will try to compete.”
“If railway operations are dualized, there will be many logistical problems. If you select only the right cargo and put it first, the logistics business, where time is life, can be challenged. The Russian government can do that.”
At this point, Youngho surprised the participants with his new suggestion.
“I think building a large logistics base in Krasnoyarsk will solve that problem. From there, you can transfer to the Kazak railway.”
“…”
“It’s only a day’s train ride from Krasnoyarsk to the Kazakh border. The route from Astana, the capital of Kazakhstan, to the city of Volgograd in southern Russia is modernized already. That could make the logistics to Europe much faster than through Moscow.”
If logistics were stagnant in the Russian government’s section, it was possible to divert supplies to Kazakhstan. The use of railways would also generate profits for Kazakhstan.
“Oh yeah, we could run it on a separate line.”
“Yes. Even if Russia is unable to start the project due to a lack of funds, our profits will remain unchanged because we have a replacement line. I believe that will make the logistics business with Central Asia and South Europe smoother.”
“Your Highness, to my knowledge, Kazakhstan also has a railway connection with China. Won’t logistics leading to China create bottlenecks?”
“That may be the case, but we will put our logistics first.”
“Wouldn’t we get in trouble when the Chinese government won’t stand still?”
“Kazakhstan is also planning more railroads, so that won’t happen.”