From Russia With Controversy

Lawmakers second guess red money keeping budget in black 

When the state signed a cooperative endeavor agreement last summer with the Russian-based company EuroChem, lawmakers barely took notice. It was just another deal being inked by Louisiana Economic Development promising more jobs for the state and eventually a ribbon-cutting ceremony. But in recent weeks the chatter in the Capitol's hallways has been ratcheted up by a small handful of lawmakers and special interests who wonder if Russia's military move on Ukraine should influence Louisiana's relationship with the company.

In exchange for $6 million in inducements to be provided by the state, EuroChem has agreed to establish and operate a nitrogen fertilizer manufacturing plan in Louisiana while making capital expenditures, creating jobs and maintaining a payroll. Ivan Vassilev Boasher, a EuroChem manager, signed the cooperative endeavor, as well as a purchase agreement for state land in Iberville Parish. The company put up $12 million as part of the purchase agreement that the state placed in escrow in June of last year. Additionally, EuroChem has secured an option to purchase private property in St. John the Baptist Parish. Officials say the site selection is not yet finalized.

LaPolitics confirmed that the $12 million is being used as part of the current fiscal year budget. With the company receiving financing from Russian state banks, and the government of Ukraine readying itself for an invasion by the country's forces, the money doesn't sit right with some. "I'm worried about that money coming from Russia," said Rep. John Bel Edwards, D-Amite. "I'm not trying to embarrass anyone, but I think we can avoid future embarrassment by taking a hard look at where we're going with this. Do we really want to be in bed with a country that has sanctions against U.S. citizens?"

After President Barack Obama announced sanctions in March following Russia's move into the Ukraine's Crimea, Russia issued its own against nine American officials, including U.S. Sen. Mary Landrieu.

Another lawmaker said he had been provided photos of Russian President Vladimir Putin with Andrey Melnichenko, who owns 92 percent of EuroChem's shares. Putin even made a well-publicized visit to EuroChem's potash mine in Gremyachinskoye in 2010. Russian banks and companies associated with Melnichenko have likewise been the target of a number of investigations over the years. "It's troubling to me that we're allowing them to operate here," said the lawmaker. "We're being told that the U.S. will issue more sanctions and I'm eager to see if any of their company officials will be included."

According to Business Insider, "Governor Jindal was asked if he has met Melnichenko for talks on the new project, and whether Eurochem has said it has received Kremlin permission for the proposed investment. Jindal’s spokesman, Sean Lansing, refused to reply."

The 2013 article goes on: "Last year Putin explicitly warned against 'offshorization' of the country’s capital… The Kremlin indicates that Melnichenko has not consulted with Putin in advance of the Louisiana move… But can the brash, opportunistic bluffer be serious in challenging the Kremlin? Or is the Louisiana project a ploy, intended to give Melnichenko more leverage to retain his Russian assets free of the pressure to swap, share or sell which he has reportedly been under for several years?"

Resentment likewise seems to be growing from within certain corners of the domestic energy industry in Louisiana, which has some of the lowest prices of industrial natural gas in the American market. According to statistics compiled by the U.S Energy Information Administration, natural gas prices in Louisiana were between $4.15 and $8.15 per million BTU for the first quarter, while Russia’s lowest price during the same period was roughly $10.69 per million BTU.

Natural gas seems to be at the heart of the political friction both here and overseas. Ukrainian Prime Minister Arseny Yatsenyuk issued a statement this week declaring that Russia is using natural gas as a "weapon" against his country. He also claims that energy resources worth billions of dollars have been seized in Crimea.

Contacted for comment, EuroChem responded through a prepared statement: "EuroChem continues its due diligence and engineering studies on the proposed facility in Louisiana and will make a final decision when the studies are completed over the summer."

Stephen Moret, secretary of Louisiana Economic Development, also issued a prepared statement following a request for an interview with a department official: "LED continues to be supportive of the project. The company has not yet selected a location in Louisiana as it still is considering technical site matters associated with its in-state location options. The company indicated during its announcement in July 2013 that it planned to make a location decision within a year. Accordingly, we expect to know more sometime this summer."

With the deal essentially sealed, there's not much more lawmakers can do aside from passing a resolution expressing the sentiment of the Legislature. Even if they wanted to block the inducements, they would have to wait since the taxpayer-funded tap connected to the performance-based grant wouldn't begin to open for the company until fiscal year 2018.

A version of this story was first published in Issue 979 of LaPolitics Weekly on May 1, 2014. Wish you would have read it then? Subscribe now!

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