A view of the Kremlin with cathedrals in the foreground
Want to invest in Russia? Here is what The Street.com offers in terms of advice:
Brazil, Russia, India and China are the four countries expected to outpace their emerging market peers over the next several decades…of the BRIC countries, Russia is probably the most volatile market and the one that has been off the radar of mainstream American investors the longest.
I think this is one of the most reasonable overviews of exchange traded funds that I have read in the last few months
In a previous Russia Blog post (Russia's Most Wanted: Experienced Investment Bankers), I wrote about more and more foreign banks coming to Russia and finding their own ways to enter the Russian banking system. Some of them pick the organic growth path of getting the licenses and starting from scratch. Other major foreign financial institutions prefer to acquire a Russian bank and build their business in this country from an existing foundation. Last week there were two news items regarding foreign banks' plans for mergers and acquisitions to enter Russia’s banking sector.
To mark the publication of Alexander Solzhenitsyn's memoir of exile, My American Years, the German magazine Der Spiegel recently published an interview with the 88 year-old Russian writer. While many Westerners today argue that Putin's Russia is resurrecting the Soviet Union, Mr. Solzhenitsyn, who actually survived the Gulag, has a very different view of modern Russian history.
As you might have noticed, Russia Blog has added several political, business and cultural news
sources at the top of its blogroll, listed in alphabetical order. Also, if you point your cursor at the categories in the far left hand column of Russia Blog, you will see descriptions of each category to facilitate searching for information on different topics.
In addition to linking to the BBC Russia service, Voice of America, Radio Free Europe, Russian news agencies and English-language newspapers, we have provided links to the websites for Russia's two major stock markets, the American Chamber of Commerce in Russia, the Patriarchate of Moscow, and Sochi's preparations for the 2014 Winter Olympics.
If you keep scrolling down, you will find Russian news aggregators, political commentary websites where Real Russia Project content has previously been featured, and much more.
Click here to read a transcript of the most recent RRP event in Washington, D.C.
Women compete in a high-heel sprint in St.Petersburg July 21, 2007. Some 100 Russian women took part in the race wearing high-heeled shoes with a required minimum height of 9 centimetres (3.5 inches) to compete for a shopping voucher worth 50,000 roubles (about $2,000).
In the recent tit-for-tat diplomatic expulsions from London and Moscow, leading Western press outlets, like the Washington Post and The London Times, have set a new standard for journalistic inventiveness by suggesting that Britain's refusal to reveal any evidence about the murder of Alexander Litvinenko must mean that it has evidence implicating the Russian government!
Why has this evidence not been made public? Because, you see, new Prime Minister Gordon Brown does not want to start his term by damaging relations with Russia. The fact that he has already done so by expelling four Russian diplomats seems to have escaped their notice.
Thomson Financial, one of the most trusted business information providers in the world, released its Equity Capital Markets Review this month for the second quarter of 2007. The Russian investment bank Renaissance Capital was ranked in 10th place in this survey, up from 29th place last year. Among the major equity capital market (ECM) transactions in Russia, RenCap has led all takers this year by raising $8 billion in an IPO for Vneshtorbank (the largest IPO worldwide this year), where RenCap acted as a joint bookrunner. RenCap has also acted as an underwriter on IPOs for MMK (see the extended post), Integra, Volga Gas, Dixi, Nutritek, Rosinter, United Bank for Africa and several other secondary transactions and private placements this year. Renaissance has advised 12 ECM transactions in the first six months of 2007, with a total value of $12 billion.
Click on the extended post to see a table from the Equity Capital Markets Review by Thomson Financial.
Rusiya Al-Yaum (روسيا اليوم ) Russia Today in Arabic
Charles Ganske
Rusiya al Yaum news presenter Ibrahim Al-Kumat
On May 4, 2007, Russia's RIA Novosti news agency launched an Arabic satellite news channel, Rusiya Al Yaum (Russia Today). The new channel uses the same name, logo and format as the English language Russia Today TV network, which first went on the air in late 2005. Rusiya al Yaum is broadcast every day from 7 a.m. to 3 a.m. Moscow time (you can watch it live over the web here)
In 2004, America created the Al-Hurra (The Free One) satellite television network to reach Arabs with news and views unfiltered by Arab governments. Now Russia has created its own government-sponsored satellite TV network to engage the Arab world.
Click on the extended post to watch a clip from Rusiya al Yaum.
- Russia continues to deliver very solid economic data, and demonstrate that it is unlikely to stop expanding in the event of an unexpected fall in oil prices. Domestic demand is now the main driver of growth.
- Political risks associated with the transition to a new president in March 2008 are the biggest short-term concerns. President Putin has repeatedly vowed that he will step down in accordance with the constitution. Here at FINAM, we strongly believe there will be a smooth transition and we expect no major revisions to current policies.
- Steady improvements in living standards have provided the Kremlin with a strong mandate, and have provided the basis for more consumer demand. The policy of increasing state ownership of strategic sectors like aerospace, energy and metals is unlikely to change in the near future. This will cement the role of the “national champions” as the foundation of the country’s economic system, even as private and individual investment continues to grow.
- Strong economic performance and positive sentiment on future economic development has strengthened Russia’s ambitions to play a more influential role both internationally and in the near abroad. Periodic tensions in inter-CIS relations are likely in the coming years, particularly as Russia continues to eliminate special CIS prices for energy and other raw materials.
Ivanov, Medvedev, and Putin (Photo by: Kommersant)
Russian First Deputy Prime Ministers Sergey Ivanov and Dimitri Medvedev are the two front runners to succeed President Vladimir Putin in 2008. Both members of President Putin's cabinet have attracted a lot of publicity in recent months. In June 2007 Ivanov was profiled by the UK Times newspaper as part of its coverage of the St. Petersburg Economic Forum. Earlier this year, Time magazine covered Medvedev's speech on behalf of the Russian delegation at the World Economic Forum in Davos, Switzerland. In both Moscow and the West, Kremlinology has come back in vogue as pundits and think tank scholars try to predict who will emerge as Putin's preferred candidate.
The Deputy Prime Ministers were the featured speakers at a recent summer camp put on by Nashi, a pro-Kremlin youth organization. The Nashi movement has become very controversial in recent months since its activists picketed the Estonian embassy to protest Talinn's decision to move a Soviet memorial to fallen Red Army soldiers. More recently, for its summer convention outside the city of Tver, Nashi rolled out posters depicting former Russian Prime Minister Mikhail Kasyanov and chessmaster- turned-political activist Garry Kasparov as prostitutes.
According to the article from Russia's ITAR-TASS news agency, the two candidates were asked by Nashi students for their opinions on the revival of religious life in Russia since the end of the Soviet Union. Here is what they had to say:
In April 2007 I wrote about Russian state capitalism, this curious hybrid of government-owned “national champions” in strategic industries operating alongside a booming private sector. In recent months some new developments have emerged and I want to pinpoint some new investment opportunities.
The trend towards public private partnerships (PPPs) is becoming more pronounced with every month. In fact, the MMD public relations firm recently released a report describing in detail what is going on in this area of the economy. Here are a few citations:
“Public Private Partnerships (PPPs) have become an integral part of a new national idea: creating a strong Russian state that defends its national interests, combined with strong Russian businesses [that are] competitive worldwide.”
I have been waiting for someone to write the truth about what is happening in the supposedly angry exchanges between Russia and Britain. You don't see anyone reacting too excitedly, do you?
In fact, the only people who should be really upset are the four Russian diplomats and their families that were kicked out of England because the Kremlin would not order the extradition of Andre Luguvoi--who is wanted for possible trial in England--and the four English diplomats and their families in Moscow who were uprooted by the Russians in retaliation.
It is a real pain to have to move out of your house suddenly, yank the children out of school, fire the maid and go back to your home country when you are only part way through your overseas posting. I feel at least a little bit sorry for them all, but nobody else.
Britain Expels Russian Diplomats Russia Expels British Diplomats
Charles Ganske
A Russia Today TV news clip about the Alexander Litvinenko case
Last month the UK Crown Prosecution service charged Russian businessman and former KGB bodyguard Andrei Lugovoy in the polonium poisoning death of Alexander Litvinenko (you can watch Lugovoy's press conference responding to these charges here). London is demanding that Lugovoy be extradited to face a murder charge in Great Britain. However, the Russian government argues that Russia's constitution prohibits sending Russian citizens to face trial abroad.
50% of Russians expect President Vladimir V. Putin to run for a third consecutive term, according to a poll released last week by Renaissance Capital. Just one in three voters believe the President's promise that he will step down after the March 2008 elections.
The Russian constitution currently forbids three consecutive Presidential terms, although it would not prohibit Putin from running for President again in 2012. Putin's youth (he will only be 56 next year) and recent statements that he would like to continue serving in public life has fueled speculation that "VVP" might return to politics after four years in a corporate position, perhaps as chairman of Gazprom.
Every day adds something new and exciting to life here in Moscow. The web has created many new opportunities for my business, and the feedback I get from readers of Equity Financing in Russia and Russia Blog has amost all been positive. In fact, thanks to StatCounter, I have compiled a nice list of visits to my site from servers of numerous government agencies and financial institutions all over the world. Clearly there is a growing demand for real-time and breaking news from Russian financial markets.
President Putin and Chinese President Hu Jintao have both built up national sovereign funds
In a previous Russia Blog post (“Is the U.S. Seeking Capital from Russia's Stabilization Fund?") about U.S. Deputy Treasury Secretary Robert Kimmitt visiting Moscow, I briefly discussed the issue of sovereign funds. The growing clout of governments as institutional investors was a hot topic last week in the international news media. While I have neither ability nor the desire to discuss the issue in depth, I do have a few observations.
The Economist has produced an interesting chart (see the extended post) for its July 14, 2007 issue that shows where Russia’s Stabilization Fund ranks among sovereign funds worldwide. The Economist's numbers were calculated by Morgan Stanley and reflect the position of sovereign funds as of March 2007.
Ein Kelokeynu, M. Himmelshtayn, Soloist - Chief cantor of St. Petersburg Synagogue Baruch Finkelstein; Recorded Live at the Moscow Tchaikovsky Conservatoire
The news headlines in recent weeks have been dominated by rising diplomatic tensions between Russia and the West. The White House has stuck with its plan to locate missile defense bases in Eastern Europe. Putin first offered Azerbaijan, then at the recent “lobster summit” between Presidents Putin and Bush in Kennebunkport, southern Russia as alternative sites for the American missile defense system (assuming that these bases are intended to counter Iranian and not Russian missiles). However, the White House did not accept Putin’s offer, and the Kremlin raised the possibility of re-targeting nuclear missiles at Europe. Finally, last week Putin announced his decision to suspend Russia’s participation in the Conventional Forces in Europe treaty (CFE).
The response from some Western media outlets has been measured, while from others it has been predictably hysterical. This week Newsweek International published an article with the sensational title “The Tyrant's Turn”, and asked if “Russian President Vladimir Putin was supposed to be a pro-American reformer, what went wrong?” In contrast, the BBC has been more subdued in its reporting in the game of tit for tat between America and Russia. In the article “Cool Not Cold - Russia's New Foreign Policy” the BBC quoted one analyst saying that this is just another “diplomatic warning shot from Russia”, which “under President Vladimir Putin started to harden up its foreign and domestic policy, but this is something they [Western countries] will have to learn to live with for the foreseeable future.”
Before discussing whether this will lead to a new Cold War, someone has to ask the question: does Russia need Europe, and does Europe need Russia? And what do experienced Western leaders really believe about the New Russia?
Moskovskie Bling: Ralph Lauren Opens Two Stores in Moscow
Charles Ganske
According to David Lauren, Moscow is the new Hansel: "It's the hottest place in the world right now"
For the busy professionals in Moscow who read Russia Blog (and quite a few do, judging by the bump in our weekday traffic during lunchtime in the city), here's another video to watch while you sip your $8 café au lait at Coffee Haus.
Vogue TV recently covered Ralph Lauren personally opening two new stores in Moscow, including one location featuring 8,000 square feet of merchandise and the largest accessory department in the entire chain. A reception for the venerable fashion designer and his hundred person entourage was held at the American Ambassador's residence.
Moscow has yet to claim the top spot for IPOs worldwide (London still ranks first in this category), but it is making a strong push for becoming a global center of bling-bling and outrageous parties. Think of it as L.A., but with worse traffic jams, convenient access to skiing in the winter and even more expensive real estate.
A few days ago the Moscow Interbank Exchange (MICEX) announced its operational results for the first quarter of 2007 that showed substantial growth on the year to year basis. I am taking the liberty of reproducing excerpts from this report with some illustrations. The graphics in the extended post are selected from "Investing in Russian Stocks and Bonds", a guide published in the June 2007 issue of Institutional Investor magazine by the MICEX Group (click here to download the full report in PDF format - you can also find a link to this report in the righthand column of Russia Blog).
Click on the extended post to read more about the phenominal growth of Russia's largest stock market.
A momento from the last golden age of Russian capitalism - in this case, a 1913 St. Petersburg railway bond selling on EBay
This is an update to my previous Russia Blog post about Russian Deposit Receipts (RDRs). Now all of the official obstacles in the way of introducing RDRs have been eliminated. Last week the Russian Ministry of Justice officially registered regulations setting forth the listing requirements for RDRs. Basically these regulations copy existing requirements for listing shares. Russian brokers have welcomed the end of this long process and are expecting big trading volumes.
Now is the moment for the first issues of RDRs which I believe will be coming very soon.
You can read the original post at Vladimir Kuznetsov's blog, Equity Financing in Russia. The views expressed in this post and on his blog are the personal opinions of Vladimir Kuznetsov, and are reproduced here solely for educational purposes. To read more Russia Blog posts about Russian capital markets, click on the finance section or type www.russiablog.org/finance in your web browser.
"High oil and gas prices, combined with the long-term benefits of the Yeltsin economic reforms and with investment-friendly decisions since 2000, have brought Russia a sustained boom; this comes as an immense relief after the decade of contraction and hardship under Gorbachev and Yeltsin, during which the economy shrank by more than 50 percent—worse than the Great Depression in the United States. The World Bank reckons that gross domestic product (GDP) increased by an average of 6.2 percent annually in 2001 through 2006; the real [inflation adjusted] disposable income of the population surged by 11.2 percent per year from 2002 to 2006..."
Click on the extended post to read more excerpts from this article.
Last week France's Total S.A. agreed to a 25% stake in a major Russian oil and gas project, while the state-owned firm OAO Rosneft forged a new partnership with Royal Dutch Shell.
Over at his blog, Thomas P.M. Barnett has a few comments on these moves, contrasting Russia's openness to foreign investment in energy to the off-limits approach taken until very recently by Mexico (although the new government led by Felipe Calderon is trying to modify the Mexican Constitution to permit foreign investment in this sector). While Mexican oil and gas production continues to decline, Russian oil production has increased since reaching a post-Soviet low in the mid-Nineties. In spite of government-mandated limits on what Gazprom can charge domestic industries, Russia's gas industry has also managed to keep up with increasing demand both Europe and from a booming economy at home.
Forbes magazine reported this weekend that the exiled Russian oligarch Boris Berezovsky is facing an indictment for money laundering in Brazil. A warrant for Berezovsky's arrest has been filed with Interpol.
According to the Forbesarticle: "Brazilian prosecutors say Media Sports Investment, which in 2004 formed a partnership with the popular club, laundered millions of dollars received from Berezovsky to acquire a string of high-profile players."
"A Sao Paulo federal judge sent a request to Brazil's Justice Ministry requesting Berezovsky's extradition, froze bank accounts of Corinthians and London-based MSI, and demanded that the club provide a list of all players acquired with money from MSI within 10 days, according to a statement from the judge's office."
Logo of EuroSet, the largest cellular retailer in Russia and the former USSR
The last twelve months have witnessed several interesting changes happening in Russian banking. In particular, I wanted to highlight the stories of two prominent Russian businessmen who have established their own banks to expand their business operations in innovative ways.
The first story relates to Euroset - the biggest chain of retail stores in Russia and the Commonwealth of Independent States (CIS) selling mobile phones. Its 2006 sales were around $4.6 billion. Euroset is 100% owned by Dutch Euroset Holding, which belongs to Yevgeny Chichvarkin and Timur Artemyev. Euroset has a very advanced web-site and its owner Yevgeny Chichvarkin is noted in the Moscow business community for his special style. For example, at a recent conference hosted by Renaissance Capital, Mr. Chichvarkin shocked the crowd by wearing a pair of casual torn jeans with holes that revealed his leg hair. Nevertheless, Yevgeny Chichvarkin is an extremely successful businessman and a talented manager who should not be underestimated.
Getting from point A to point B in Moscow is not easy, and neither is preparing an IPO - but new types of financing are giving Russian companies a chance to get capital moving (Photo by: English Russia)
Over the last year several pre-IPO funds have emerged as investment vehicles in Russia. Generally speaking, pre-IPO financing is a hybrid instrument that combines features of both Private Equity and IPO financing. Over 90% of all Russian companies that completed IPOs started with private placements, and pre-IPO financing is an extremely useful instrument to accelerate Initial Public Offering. The most acceptable candidates for such transactions are the ones that are considering IPOs, but lack expertise and/or resources to properly prepare an offering. Generally speaking, most of the pre-IPO funds have the following characteristics:
- Investment takes place between 24 months and 12 months prior to IPO
- The usual stake does not represent more than 2% - 20% of the equity
- Investments are in cash, in return for equity, with an agreed package of securities as a fall-back plan, should the IPO fail
- Control of the company is not one of the investor’s objectives
Many foreign investors are now interested in buying equity in Russian companies, and many do invest. To spur further action and facilitate sound decisions, I have produced a small research effort that I think may be of some interest to potential investors in Russia. My research is based on official statistical data provided by Russia’s Federal State Statistics Service. I have identified the most successful industries and summarized their recent performance in a table (click on the extended post to view this and the rest of the story).
Bad Russian Music Video of the Day: Russia's Entry into the 2007 Eurovision Contest
Charles Ganske
Most Americans have probably never heard of the annual Eurovision song contest - even though all of the lyrics are in English. Europe's combination of the Olympics and
