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Bruce Chapman in Bloomberg's Moscow studio on May 15, 2007
MOSCOW - Two weeks ago, during Secretary of State Condoleezza Rice's meetings at the Kremlin, Discovery Institute President Bruce Chapman was interviewed by Bloomberg's television news bureau in Russia for his reactions to the talks.
Chapman said that there are no substantive reasons for the two nations to be so negative towards each other and therefore Russia and the U.S. should "lower the temperature" of their rhetoric. Alone among commentators, Chapman also predicted that presidents Putin and Bush would meet face to face in the near future.
Former Ambassador Chapman apparently has influence in high places: the resulting communiqué from the Rice-Putin (and Foreign Minister Lavrov) talks emphasized the need to lower the rhetoric, and two weeks later a Putin-Bush summit due to take place in Kennebunkport, Maine was announced for early July.
This week the BBC published an article about the new-found prosperity of Nizhny Novgorod, the fourth largest city in Russia. This blue collar city of 1.3 million people on the Volga River now has its first IKEA store. IKEA has already opened three stores in Moscow and two in St. Petersburg.
Compared to her last visit eight years ago, the BBC correspondent is surprised at the variety of foods available at a local supermarket (no word on whether the food store sells powdered cane sugar, though) and meets an upwardly mobile young Russian middle class couple at one of the city's new shopping malls.
UPDATE: Our reader Tim Newman, who works in the oil and gas industry on sunny Sakhalin Island in Russia's Far East, writes:
Shame you didn't mention the IKEA which opened in Kazan in late 2005. A good friend of mine was the manager of the whole thing, and I spend a day walking about the place days before its grand opening when I was visiting him and his wife in the city.
We apologize for the omission. If any of our readers have photos of this new MEGA/IKEA store in Kazan, please send them along for the panorama series of posts in the Photos section of Russia Blog.
Click on the extended post to read an excerpt and for a link to the original article.
Continue reading "Nizhny Novgorod's New IKEA" »
 ABC, CBS, and NBC apparently have closed their bureaus in Moscow, or greatly reduced them. CNN has shrunk to one reporter, and Western print media also have reduced staff lately. The big exception among the international media is Bloomberg News. Speaking recently to fellow expats on Bloomberg's elegant terrace overlooking the Kremlin two blocks away, James Brooke, Enterprise Reporter, said that the Moscow bureau has doubled in the past year to 22 reporters and editors. There is a new Bloomberg bureau in St. Petersburg and another coming in Kazakhstan. There is even a stringer now for Georgia-Armenia and there may be another soon for Azerbaijan. Bloomberg also boasts Russian speakers and writers, a small but up-to-date TV studio in Moscow and excellent connections in London.
The Moscow bureau alone is Bloomberg's fourth largest overseas unit (among 50)--after London, Frankfurt, and Paris. "We are investing in the personnel to make Bloomberg the premier source of business news for Russia," Brooke states.
Continue reading "Bloomberg News Blooms in Russia" »
Director of Equity Financing, FINAM Investment Company, Moscow
The last era when Russia was an emerging market - an ad from 1914
Source: A Fistful of Euros blog
The UK Financial Times noted last week that we have seen a dramatic increase in initial public offerings from emerging-market companies this year. During the fist five months of 2007, the total money raised represents half of the volume for all of 2006. There were 268 emerging market IPOs which raised a combined $53.8 billion. That compares with this time last year when 184 IPOs had raised $25.6 billion. The paper cites three reasons:
(i) ample liquidity in the financial system,
(ii) a strong appetite for risk among investors;
(iii) growing demand for new equity from fast-growing companies.
It is really amazing -- just in nine days, three major IPOs have taken place: Russia's Vneshtorbank with $8 billion raised; a $1.85 billion offering by Halkbank of Turkey; and the $1.4bn flotation of Russia's Africa Israel Development Ltd.
Continue reading "Russian IPOs - Week 21 of 2007 Reviewed
Russia Profits from the Worldwide IPO Boom" »
American and Russian veterans join representatives from each military to celebrate
the 60th anniversary of the Elbe linkup on April 25, 2005 (Photo by: China People's Daily)
Today the United States of America observes it's own version of Victory Day, called Memorial Day.
Here at Russia Blog, we pause to remember the sacrifices of America's Greatest Generation, which fought alongside the Russian people to end Nazism. We wish all American veterans and their families a wonderful holiday!
April 25, 1945 - The U.S. 69th Infantry Division meets the Soviet 5th Guards Army at Torgau
Andre Lugovoy met Alexander Litvinenko on November 1, 2006 in London
Last week the UK's Crown Prosecution Service indicted Andre Lugovoy, an ex-KGB officer and former bodyguard for exiled Russian oligarch Boris Berezovsky. The indictment drew sensational headlines in the British press and commentary on both sides of the Atlantic blaming Russian President Vladimir Putin and Russia's secret services for the death of Alexander Litvinenko from radiation poisoning last year.
To date, the Russian Prosecutor General's office claims that it has not received sufficient evidence from the British government to open a criminal case against Mr. Lugovoy in Russia. Article 61 of Russia's constitution forbids extraditing Russian citizens to face trial abroad. Last week Mr. Lugovoy told Russia's RenTV last week that he fears that the British government may try to take action against him on Russian soil. Mr. Lugovoy claims that he is innocent and argues that he was also exposed to harmful levels of radiation during his meetings with Alexander Litvinenko in London on November 1, 2006.
Continue reading "UK Crown Prosecution Service Indicts Lugovoy" »
Director of Equity Financing, FINAM Investment Company, Moscow
Troika Dialog CEO Ruben Vardanian and President Putin open the new
Skolkovo School of Management on September 21, 2006 in Moscow
One of the current constraints on growth in Russia's booming economy is a critical shortage of experienced people with executive-level training. In Moscow, many middle or senior management positions that would normally be filled by fortysomethings in the United States, Western Europe and Japan are going to ambitious young Russians who know how to succeed in the Russian marketplace, but who often lack professional education for managing businesses at an increasingly global level. According to government statistics, only three out of every 100,000 Russians have an MBA, compared to 70 in the United States.
To address this glaring need, the Russian government has developed a high-priority national educational project. As part of the national education project, two new business schools, one located in Moscow and the other in St. Petersburg, opened their doors last year. Both projects are backed by the government, which would like to see Russian counterparts to Europe's Insead, and America's MIT and Wharton.
Continue reading "Russia Launches New Elite Business Schools" »
Presidents Putin and Bush at the G-8 Summit in St. Petersburg in 2006
Photo by: MosNews
Yesterday the President of the American University in Moscow, Dr. Edward Lozansky, published an op-ed in the Washington Times highlighting some improvements in U.S.-Russia relations that have not been widely reported in the U.S. media. While politicians on both sides continue to exchange barbs, the amount of trade between our two countries quietly grows.
Dr. Lozansky recently attended the Real Russia Project event, "Russia: Friend, Foe or What?" held at the University Club in Washington D.C. on April 18, 2007. With Dr. Lozansky's permission, we have reproduced his article here.
-The Editors
Click on the extended post to read the article.
Continue reading "Focus on Positives in U.S.-Russia Relations" »
Director of Equity Financing, FINAM Investment Company, Moscow
Several banks owned by major Russian oil producer OAO Tatneft are reportedly mulling IPOs
Last week saw more news reports on several Russian firms' plans for new IPOs and several interesting articles commenting on the Russian equity industry as a whole. These stories suggest that Russian issuers are looking for more effective ways to attract capital, both at home and abroad.
Before looking at the latest equity market developments in Russia, it is necessary to put them in a global context. The international accounting firm PricewaterhouseCoopers released their U.S. IPO Watch Report that shows that IPO activity in European markets declined during the first quarter of 2007. IPOs on European exchanges raised $13.3 (€ 10.6) billion, down 15% from $15.6 (€ 12.4) billion in the first quarter of 2006. Total volume declined 16% year over year from 164 to 137 IPOs.
Although London remains Europe's premier IPO market with 43% of IPO volume and 81% value for new listings, these numbers represent a sharp drop in volume and a slight decline in value compared with Q1 2006. London's decline can be attributed to less activity on the London Stock Exchange's Alternative Investment Market (LSE AIM). At the same time, U.S. IPO activity during the traditionally quiet first quarter hit a seven year high in terms of both volume and proceeds, with $12.1 billion raised through 64 IPOs, up from $11.6 billion from 54 IPOs in Q1 2006.
Continue reading "Russian IPOs -- Review of the 20th Week of 2007
IPOs More Popular in U.S. than U.K. in 1st Quarter" »
Director of Equity Financing, FINAM Investment Company, Moscow
Last week Kommersant published a lengthy interview with Hiroshi Toda, Chief Operating Officer (COO) and International Operations Officer of Japan's Nomura Holdings, Inc.
The article presented an interesting Japanese view of the Russian stock market and the rapidly-developing investment banking industry in Russia. 2007 is not the first time Nomura has entered the Russian market. In the mid-1990s, the bank dealt with shares of Russian "blue chip" stocks. After the 1998 default, Nomura closed its offices in Russia, having lost $600 million.
Continue reading "Nomura Investment Bank Returns to Russia" »
President Vladimir V. Putin celebrating Easter Sunday 2007 with Patriarch Alexei II
Thursday marked a historic occasion in Moscow - the reunification of the Russian Orthodox Church with the Russian Orthodox Church Outside Russia (ROCOR) . For Patriarch Alexei II, this marks another triumph by the church over the materialist legacy of atheistic Soviet Communism. For Russian President Vladimir Putin this event is another example of Russia's spiritual and national revival in recent years. According to an Atlantic Monthly article by Paul Starobin, Putin was secretly baptized as a child by his mother in the final years of Stalin's reign, and continues to meet regularly with his personal confessor Father Tikhon.
Russia Blog has written previously about this topic and other topics related to Russian Orthodoxy:
Easter in a Russian Town
Xristos Voskrese! (Christ is Risen!)
Are Russians Becoming More Religious?
Click on the extended post to read an excellent news article from the Los Angeles Times, and commentary on the splits that remain in the Orthodox churches by RIA Novosti commentator Anatoly Korolev.
Continue reading "Russian Orthodox Church Reunites" »
Director of Equity Financing, FINAM Investment Company, Moscow
Logo for the FINAM IT Venture Fund
This week we learned that multiple venture capital firms in Russia are issuing IPOs. The latest examples are: Tau Capital PLC, an investment company based in Kazahkstan. Tau Capital recently had a successful listing on the London Stock Exchange's Alternative Investment Market (LSE AIM). This venture was formed by a group of U.S. investment bankers who teamed up with financial experts from Kazakhstan to develop public and private businesses in Russia and Central Asia. Another example of this trend is the Russian buyout fund - Russian Strategic Growth Holdings PLC (a subsidiary of Russia's National Bank Trust and Trust Investment Bank), which plans to list on the LSE AIM this summer with the goal of raising at least $150 million.
Here at FINAM, we are raising capital domestically in Russia and hope that foreign investors will participate in our own efforts. Of course, our upcoming IPO on the Moscow Interbank Exchange (MICEX) junior market will be rather modest, but it presents a unique and challenging opportunity to investors.
Continue reading "FINAM to Launch IT Venture Fund IPO in June 2007" »
Bondarchuk on the set of 9 Rota in 2005
Fyodor Bondarchuk (9 Rota, Zhara), the 40 year-old son of the famous Soviet director Sergey Bondarchuk (War and Peace), is producing a new big budget film called The Inhabited Island, due to be released in October 2008. The cast for Obitaemyy Ostrov (Обитаемый оÑтров) includes Andrei Merzlikin (Bumer, Bumer 2) and a cameo by Bondarchuk. You can watch the trailer here.
Click on the extended post to read more.
Continue reading "Fyodor Bondarchuk Directing New Film -
The Inhabited Island" »
Director of Equity Financing, FINAM Investment Company, Moscow
A globe depicting the world's fastest growing economies in red
(Hat tip: Jay Walker's Confused Capitalist blog)
This weekend Dow Jones published a news article ("Emerging-markets Fund Managers See Rebound For Russia, China") describing a report by Morgan Stanley Capital International on global emerging markets. While Morgan Stanley analysts noted that China and Russia have delivered lackluster stock market returns thus far in 2007, the report also states that:
- Russia faces political risks associated with the 2008 elections and remains heavily dependent on oil and gas prices, and is generally considered the cheapest buy of the BRIC (Brazil, Russia, India and China) emerging markets. However, Russia has better long-term growth prospects than most other emerging markets and is expected to outperform in the next 12 months.
- Russia's government and private sectors are investing oil and gas profits in updating the country's infrastructure and financial systems.
Click on the extended post to read more.
Continue reading "Russian IPOs - Week 19 of 2007 Reviewed
Emerging Market Fund Managers Bullish on Russia" »
Police in the southeastern Siberian city of Chita are investigating a 38 million ruble ($1.5 million) heist from a branch office of Sberbank, Russia's largest retail banking chain.
The robbers apparently entered the bank without leaving any traces of a struggle last Friday night after hours, killed the two bank guards, and left their bodies tied up inside the branch offices. This has led police to speculate that the guards may have known the perpetrators. The robbers disabled the bank's security cameras before making off with the cash. This crime is the biggest bank robbery Russia has witnessed in two years.
Click on the extended post to read the Moscow Times article.
Continue reading "Sberbank Robbed in Chita" »
Director of Equity Financing, FINAM Investment Company, Moscow
Former FFMS director Oleg Vyugin
Last Thursday Russian Prime Minister Mikhail Fradkov signed an executive order relieving Oleg Vyugin from his position as director of the Federal Financial Markets Service. As of Thursday, there was no official confirmation of this move on the FFMS web page and Oleg Vyugin's biography was still posted on the site. However, Mr. Vyugin made some statements last year suggesting that he is looking for more dynamic work than supervising bureaucrats.
All Russian financial market experts agree that he did an exceptionally good job leading FFMS. Compared to March 2004, when Vyugin took office, this year an estimated 70% of all transactions involving Russian securities will be completed in Russia's stock markets. A far-sighted policy implemented by Mr. Vyugin (requiring 30% of listed transactions to be done in Russia) has brought a considerable number of Russian IPOs back home.
Continue reading "Vyugin Going to Goldman Sachs?" »
Director of Equity Financing, FINAM Investment Company, Moscow
Logo for Russian IT Seasons 2006, a recent U.S. event promoting outsourcing to Russia
Venture capital first surfaced in Russia in the early 1990s. Venture capitalism began in Russia with a lot of help from foreigners, with the goal of giving the New Russia a mechanism for promoting the prompt development of both individual companies and the economy as a whole. During the Nineties, the European Bank for Reconstruction and Development (EBRD) established 11 regional venture funds in the country. At the same time, several funds were introduced with the participation of the World Bank's International Finance Corporation and American capital investors. By 2000, a number of experts and institutions (Russia's Information Technology and Communication Ministry, iKS Consulting, Troika Dialog Group, etc.) started producing reliable research data on venture financing in Russia, particularly in the IT sector.
The healthy influence of venture financing in Russia today is supported by these current statistics:
• For the last 7 years, the share of capital financing venture projects in the Russian Federation from Russian investors has increased up to 26%, while in 1998 this figure was only 3%.
• The average profitability of Russian venture capital projects has not been less than 11% per year since the market came into existence in 1994.
• At the end of 2005, the volume of the capital under management for all VC funds operating in the Russian market had reached $ 4.8 billion.
Click on the extended post to read more about the rapid development of information technology and the spread of the Internet in Russia.
Continue reading "Investing in Russia's IT Sector --
Is it Worth Your While?" »
For Russians, the iconic image of Red Army soldiers standing victorious over the Reichstag is the equivalent of the U.S. Marines raising the American flag at Iwo Jima
Today is Victory Day in Russia, the holiday when the country pauses to remember the Russian victory over Nazi Germany. Historians estimate that between 1941 and 1945 the Soviet Union lost 8.5 million soldiers killed, wounded or missing in action, and more than 12 million Soviet citizens died from starvation, deportation, and mistreatment.
To put Russia's staggering losses between 1941-45 in perspective for Americans, the equivalent would have been for America to lose New York to a three year siege, to have forcibly evacuated millions of people beyond the Rocky Mountains, followed by the loss of nearly every city east of the Mississippi to the enemy, until the American army finally stopped the invaders at the decisive battle of St. Louis.
UPDATE - 05/20/2007: Russians in Bellevue, Washington commemorated Victory Day. You can read more about it here.
Click on the extended post to read more.
Continue reading "Victory Day 2007" »
Presidents Bush and Putin
America has enough enemies in the world; we don't need another one in Russia. Yet much of the recent media and political commentary on the Eurasian giant comes across as one sided, without nuance and unnecessarily alarmist. Russia is not our ally, but it is also not our foe. Of course, we can provoke a greater hostility if we really work on it. But doing so is plainly against our national interest.
Indeed, national interest is exactly the light under which U.S.-Russian relations should be examined. As Lord Palmerston said of England in the 19th Century, a great nation does not have permanent allies or permanent foes. That only sounds cynical; in fact, it is the basis for building serious, open-eyed cooperation that must benefit both countries.
Continue reading "Heal the Rift with Russia" »
Director of Equity Financing, FINAM Investment Company, Moscow
Recently the Moscow Interbank Currency Exchange (MICEX) summarized its results for 2006 and some notable achievements so far this year. In 2006, the total volume of transactions on the MICEX in non-government securities, including operations in stocks, bonds and REPOs, grew 3.2 times and reached 20.38 trillion rubles ($ 754.9 billion) versus 6.40 trillion rubles ($ 225.6 billion) in 2005.
The daily average volume of transactions in stock assets reached 82.5 billion rubles ($3.1 billion) per day. In January-March 2007, the volume of transactions in non-government securities on the MICEX SE reached 7.82 trillion rubles ($297.4 billion), 2.5 times more than in the first quarter of 2006, while the daily average volume of transactions reached 137.2 billion rubles ($5.2 billion). In 2006, efforts to organize IPOs on the stock market began to bear fruit with seven major corporate IPOs, including Rosneft, Severstal, OGK-5 and some others, which together raised about 350 billion rubles (over $13.2 billion).
As of early 2007, 586 firms were providing access to trading for 265,000 investors (in 2006 134,000), including over 24,000 legal entities, over 230,000 individual investors, 2,000 non-residents and almost 8,000 institutional investors. In April 2007, the number of participants in trading reached 600 firms which serve over 326,000 clients. Of course, these numbers are still very small compared to the magnitude of the New York or London stock exchanges, but here in Russia, we are learning quickly.
Continue reading "Russian IPOs: Week 18 of 2007 Reviewed
The MICEX Success Story" »
Director of Equity Financing, FINAM Investment Company, Moscow
Recently Alfa Bank research issued new papers analyzing the Russian stock market. These reports feature several key points relating to IPOs and investments in Russia. The first point made by Alfa Bank analysts is that today everyone understands that we have entered into an "IPO buyers market" where Russian issuers have to curtail offering prices, or issue an IPO in a new sector that is not yet well-represented.
This year the Russian stock market is estimated to hold more than 10% of all assets listed in Global Emerging Markets (GEMs), up from 6.3% in 2006. The major reasons for this trend are the numerous Russian IPOs and placements of new equities. The Russian federal government remains the biggest single investor in Russia's stock markets, and 2/3rds of all transactions are completed by partially state owned enterprises. However, the number of private equity holders continues to grow with the expansion of the market.
Russia's IPO market will approach the $30 billion dollar mark by the end of this year. According to a report by PriceWaterhouseCoopers, the combined value of these Russian IPOs is equivalent to the value of 297 European IPOs listed on the London Stock Exchange in 2006. Current projections call for accelerating IPOs scheduled to raise capital toward updating Russia's electric power infrastructure, which has been straining to keep up with surging demand from the expanding Russian economy. In addition to utilities, agriculture remains one of the most promising sectors for long-term investment in Russia.
Continue reading "Russian IPOs - Week 17 of 2007 Reviewed
Nine Commandments for Doing Business in Russia" »
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