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The Chinese have chosen not to take part in an auction to buy industrial facilities at Russia’s Likhachev plant (ZIL), Marat Khusnullin, a Moscow deputy mayor responsible for urban building policies and construction, told Izvestia.

“The Chinese decided not to take part in the ZIL project because of the current exchange rate, which increases the project cost by about 30-40 percent,” Khusnullin said.

Earlier the Chinese Dalian Wanda Group said it would participate in the project.

Head of the Moscow Municipal Constriction Investment Company Konstantin Timofeev said that to develop the plant facilities Dalian Wanda Group would have required about RUR 1 trillion ($27 billion) at the old exchange rate. The group planned to build about 1.5 million square meters of real estate at the facilities, of which 60% would have been residential buildings.

This is not the first time the authorities have encountered difficulties in cooperation with Chinese investors on Moscow projects due to the falling exchange rate. As reported earlier, the Moscow authorities had to review the terms and conditions of building a metro line to the New Moscow district. The project was to be implemented together with China Railway Engineering Corporation and China International Fund, and was initially assessed at $2 billion.

“We are not looking for new investors, as we are still trying to reach agreements with the old ones,” said Khusnullin.

Aleksey Skopin, a professor at the International Development University, said that some projects with foreign investors could be frozen. Investing in Moscow construction projects poses not only financial risks but also the risk of sanctions, which could bring equipment deliveries to a halt. Meantime, Moscow should rely more heavily on domestic investors, he says.