Thursday, April 21, 2005
AMERICAN FINANCIER REFUTES "SEVEN MYTHS ABOUT RUSSIA"
NEW YORK, April 21. (RIA Novosti's Andrei Loshchilin) - U.S. investor William Browder, who heads the investment fund Hermitage Capital Management, yesterday spoke before the Council on Foreign Relations in New York and tried to dispel "the seven great myths about Russia." The situation is not that bad as Western mass media portray it, said Mr. Browder, whose fund manages assets worth $1.7 billion in Russia. The situation in Russia is far from perfect and even good, but the country moves in the right direction, he believes. Among common errors about Russian realities Mr. Browder named widespread perceptions in the West about growing corruption and sales of state-owned assets at a knockdown price, rollback of the democracy related to abolishment of direct governor elections, stalled reforms and all but the beginning of a new Cold War after the presidential elections in Ukraine. Moreover, the American financier does not agree that the Yukos case has destroyed the prospects of the Russian economy in general. Russia's foreign debt has been reduced from $158.1 billion in 1998 to $103.5 billion in 2004, and in 2005 is projected to go down to $97.5 billion. At the same time, foreign direct investment has increased from $2.7 billion in 2000 to $11.5 billion in 2004. This year it is expected to amount to $13 billion. Yet another indication of the Russian economy's growth is average annual per capita income, which has rised from $1,933 in 2003 to 2,593 in 2004 and this year is to reach $3,307, the investor said. In an interview with RIA Novosti, Mr. Browder said that during his quarterly visits to the USA he always tried to get the real picture of what was happening in Russia across to American investors and academic circles, as Russia's coverage in Western media was often distorted. For example, everyone is talking about capital flight from Russia, but somehow no one remembers that its foreign trade surplus grows steadily, he pointed out. According to the Russian Central Bank's information, last year this crucial indicator reached $60.1 billion, while capital outflow from the country was mere $9.4 billion. Mr. Browder believes that in 2005 Russia's GDP may grow by 6 or 7%, which will make it the world's second fastest growing economy. In his opinion, investment in the Russian oil sector is the most promising, because oil prices will remain close to the current record-high level in the foreseeable future and are unlikely to go down to $30 per barrel again.
Monday, April 18, 2005
U.S. Investor Calls Russian Stock Market Very Attractive
18.04.2005 14:15 MSK MosNews - U.S. investor and head of the Hermitage Capital Management investment fund William Browder said on Monday, April 18, that he considers the Russian stock market to be very attractive and underestimated by many U.S. investors and entrepreneurs. Browder gave an interview to the RIA Novosti news agency on the eve of his speech in front of the Council for Foreign Relations in New York. Browder said that U.S. investors often ask him about the nationalization of private property in Russia, bringing up the embattled Yukos Oil Company as an example. "My answer is this: Yukos is a separate stand-alone case that was caused by certain actions of the company's majority shareholders," he told the agency. The U.S. investor also said that in his opinion Russian authorities won't make "any attempts to nationalize Russian companies". Browder also said that 90 percent of his fund's investments are made into oil and gas companies. He added that for "some time still Russia will remain an exporter of raw materials and metals". He expressed optimism regarding the Russian stock market which attracted $11 billion in investments last year. At the same time Browder said that he wants to show U.S. investors an "objective picture" of Russia. One of the problems that worry the investor is the imperfection of the Russian legal system. "The reform of legal and court systems has to be carried out in order to make Russia a more civilized place to do business in," said Browder. "My company went to court 50 times and lost 44 cases not because we had bad lawyers, but because the legal system needs some fundamental changes. And until this happens Russia will always be considered a risky place to do business." At the same time he said that the presence of a very cheap stock market will allow investors to get large profits in the future. "Russia has the world's cheapest stock market. When everything normalizes and Russia won't be such a cheap place anymore, people who have bought securities for such low prices will become the owners of large fortunes," Browder said.
Thursday, April 14, 2005
The Kremin's Not Complete Without a Gray Cardinal
04.13.2005 Alexi Cherkasov Gazeta.ru - There's a post in the Kremlin â that of the 'gray cardinal'. Whoever occupies the position is ascribed by the public to have supernatural powers. His lips are the closest to the president's ear, his hand, holding a document that needs only to be signed by the highest authority, is ever near the president's desk. His desk has only one telephone, and that telephone has a single, often pressed, button. Every time a new gray cardinal or 'Kremlin puppet master' appears on the stage, a heap of questions and rumors arises in the midst of society. The gray cardinal has powerful enemies, each of whom wants to take his place. Sooner or later, enemies will conquer even the most powerful official. However, you can eliminate a specific person, but not the eternal function that he occupied. A new gray cardinal will take the place of the fallen. Now, this mythological description about the role and the place of the gray cardinal in Russian politics may not be very realistic, but there are reasons that such a description arose in the first place. The function was carried out by different people over the last 15 years. Their posts had different names each time: state secretary, or head of the presidential security service, or, most simply, deputy head of the Presidential Administration. But of course, the door-plate never had any real significance. The gray cardinal either invents an official post for himself, or occupies a vacant post. Because it's not the position occupied by the gray cardinal that identifies him, but rather he identifies whatever post he occupies. What powers are actually possessed by the gray cardinal as opposed to the powers ascribed to him is a different question altogether. A lot depends on the personality of the man who carries out the function, but even more on the state of the government and the problems it is trying to solve at that point. Political circumstances dictate the demands on the gray cardinal's abilities and talents. And it is only after the demands are actually formulated that the most applicable official starts transforming into the gray cardinal. The rest will depend on the player's personal qualities, and on the current political circumstances. For every successful gray cardinal there is at least one loser who was unable to walk in step with the times or who overestimated his own abilities. There are some considerable figures in the latter category. Once, Anatoly Chubais failed to become a gray cardinal himself. While the appearance of a new Kremlin puppet-master is usually hidden from public view, his fall is usually preceded by a number of certain discernable circumstances. One of them is frequent public appearances by the gray cardinal. If, during the height of his power, the gray cardinal is neither seen nor heard, then a few months before his demise, this mysterious figure comes forth from the shadows and begins intensively interacting with the world. There are a lot of explanations for this, and most of them are not convincing. It's hard to believe, after all, that it only takes one apt interview or speech to stop the inevitable turn of time that dictates a change in the cardinal's vigil. And, if all the signals are right, then the time is nigh for the appearance of a successor to the current gray cardinal, Vladislav Surkov. In the last few weeks, information about his activities have appeared more rarely than information about the lives of the top people in the government. Compared to his predecessors, Surkov has always been a sociable person, although today the circle of people claiming his acquaintance has widened remarkably. This is the first and truest sign that the post of gray cardinal may soon be vacant. Of course, not all omens point to this, and it's highly possible that Surkov may serve several years in his position [as deputy chief of the presidential administration]. But he will no longer have the same power in his hands. If only because Vyacheslav Surkov's main task, which was building a "controlled democracy", has already been completed. New tasks may demand new hands and new heads. In any case, there is no need to worry about Surkov â he will not disappear. But something else here is interesting: who will replace him? Because the name of a new gray cardinal may reveal a lot about the Kremlin's future plans.
Tuesday, April 12, 2005
Impressions of Moscow
April 10, 2005 Chris Clark HAMISH ROBERTSON Australian Broadcasting Corporation - It's often said that you should never go back. But it seems that someone forgot to mention this to Chris Clark, a former ABC Moscow correspondent, who's just returned for a brief visit to Moscow, his first glimpse of the Russian capital in nearly 10 years. It's a city that's changed almost beyond recognition. In this report, Chris Clark gives his impressions of Moscow, 10 years on. CHRIS CLARK: If you ever come to Moscow, try to come in winter, or at least when there's still snow on the ground. For me, that's what's always given the place a slightly unreal quality. It creates the impression of a vast city seeming to rise out of nothing. Try to imagine something a lot bigger than Sydney, where Alice Springs stands now, but in the snow. I thought of it the first time I saw Moscow from the air and it still struck me as I returned after nearly 10 years. How did it happen? How did it start? Why here? A city of well over 10 million people just rising out of the plain. It's not even on one of Europe's big rivers, the Moscow River's a bit of a creek if put alongside it's much more famous cousin, the Volga. And 10 years later, Moscow is even bigger, faster, and noisier than ever. The noise is overwhelming at times. It's like living on the back of a snoring giant. My hotel still has the old-style heating, which won't be turned-off for another month or so. But it's now surprisingly warm for early April, too hot for the heating. Problem is, if I open the window I can't sleep for traffic noise, and I'm on the 27th floor. Russia's population has been falling, but Moscow's growing. I was the ABC television news correspondent here in '94 and '95. Moscow then was fast cars, fast black cars driven by men in black suits with even blacker sunglasses. They're still here, but now their children are driving too. Moscow is more of everything. Ten years ago there were perhaps a dozen good hotels or restaurants where the rich could flaunt their wealth, half a dozen supermarkets where imported food was plentiful and expensive. Dozens and dozens of shops in the part of town where the ABC has its bureau were derelict, a few old soviet era places struggled on, tins of cabbage or jars of pickled cucumbers piled-up, the final traces of a system that really was of another age. Now, downtown Moscow is crammed with Casinos it's Las Vegas on ice. Slot machines greet you at the airport, just in case the urge to punt is utterly overwhelming. Across the street from the ABC office is a shop the size of a supermarket that sells only cosmetics. According to a recently published survey, Russian women spend about 17 per cent, or nearly a fifth of their wages, on cosmetics. And below the cosmetics emporium is a wine shop, no window display to lead you there, just a blue neon sign, where I stumbled across Chateux Lafite, Latour and Margaux and hundreds of others, where your appetite for fine wine is limited only by you're the size of your wallet. Excess does not begin to describe the scene. I was at dinner with a very successful young Russian businesswoman who offered me these insights. We were in a restaurant few foreigners could afford but which was packed with Russians. Today, she says, you're simply trading up or trading down in every aspect of life. That's the calculation to be made. That is, you might argue, human behaviour the world over. But what I think she meant is that, at this moment, the overwhelming focus of people's lives here is about getting ahead financially. Ten years ago, I was reporting on the collapse of the rouble as it slipped out to nearly 5,000 to the dollar. Now, 27 roubles will buy you one greenback, it's actually gone up against the dollar in the last year. So people are making money while they can. Are some missing out? Yes, millions. And what of the politics? The sense is of a rather remote game played by the very rich and the very powerful. Not unimportant, but not the daily focus of affairs for most. Stability is key, people recall the chaos of the mid-nineties, and only a fool would want to return to that. The Presidency of Vladimir Putin seems likely to be judged on economics, rather than ideology. And by that measure, a lot of people are better off than they were a decade ago. So there it is, my snapshot of Moscow 10 years on: bigger, louder, faster and flashier than ever. Can we stop now please? I'd like to get off.
CAN PUTIN-SCHROEDER OPTIMISM DISSOLVE INVESTOR FEARS?
PARIS (by columnist Angela Charlton for RIA Novosti) - In the world of Vladimir Putin and Gerhard Schroeder, Russia's business climate is safe and inviting. In the real world of German investors and Russian executives, things look cloudy and forbidding. Putin and Schroeder tried hard Monday to sell their version of the world to the crowd at the Hanover industrial technology fair. The two men were as friendly as ever, but that may not be enough to revive investment in Russia, or to smooth over Russia's troubled relations with the European Union. The two leaders didn't discuss - at least publicly - the main reasons for slumping western investment in Russia: the crackdown on oil giant Yukos and Putin's political direction, both of which make investors fear for the future. Putin, as usual, didn't mention Yukos but dismissed concerns about re-nationalizing other companies, and promised to make Russia's economy even more liberal and open in the coming years. Schroeder, meanwhile, suggested that investors should be putting more money into Russia, not less. Putin needed this confirmation of the sturdy Russian-German relationship ahead of an EU-Russia summit next month, which promises more conflict than camaraderie. The questions of Yukos and Russia's democratic future are sure to get open airing, along with differences over Chechnya and the revolutions that have swept Ukraine, Georgia and Kyrgyzstan. Schroeder didn't dwell on these questions Monday, and the two leaders kept their talks purely economic. That was just what Putin needed, a chance to show off his liberal market credentials instead of being forced to defend his less-than-liberal political views, as he was when meeting with U.S. President George Bush in February. Putin was right to try to soothe German investors, since Germany is Russia's biggest trade partner, and other European and North American investors often follow the German lead on how and where to put their money in Russia.It remains unclear whether they were convinced by his appeal. The German-Russian relationship rests heavily on the two leaders' personal bond, and enormously on gas. Schroeder seemed to suggest that investors' concerns about Russia were not worth damaging the crucial partnership that keeps German homes heated with relatively cheap Russian gas. And one of the key deals Putin and Schroeder announced Monday was for joint gas extraction with Gazprom and German businesses. Schroeder recognizes the danger in such single-minded trade and tried to encourage cooperation in hi-tech, too. But many German and other western firms are waiting to see what happens to a key non-gas cooperation deal between the two countries, under which Siemens would build much-needed high-speed trains for Russian markets. The plan, which both presidents enthusiastically announced last year, has faced months of resistance from Russian conservatives trying to protect the strategic railroad industry. Such Cold War-style fears that foreign investors are spies intent on ruining the Russian economy undermine Putin's liberal arguments. A more legitimate Russian fear, however, is that German companies could shift their Russian investments to Ukraine. Ukraine's aggressively pro-EU policies and its rising star status as a new democracy form attractive alternatives to Russia's unpredictable tax inspectors and nationalist policies. In the political sphere, EU officials already compare Russia to Ukraine, unfavorably. This further angers Kremlin policymakers, insulted at even being lumped in the same category as poorer, smaller Ukraine. The Kremlin also feels betrayed by Ukraine, which Russia sees not as a colony but as a natural partner. Schroeder's voice in the EU is increasingly diluted by those of new, less Moscow-friendly voices from central and eastern Europe. But Germany is still the EU's biggest economy, and it's good news for Russia that Schroeder is in no hurry to abandon his relationship with Putin or Russia's gas companies. Russia's leaders see comfort, not irony, in the fact that Germany is its strongest European ally ahead of grandiose Russian celebrations marking the 60th anniversary of the Nazis' defeat.