Director of Equity Financing, FINAM Investment Company, Moscow
Russian President Vladimir Putin
- 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.
Russian GDP compared to global crude oil prices in the last few years
Here in Moscow, we are optimistic about the continued development of Russian financial markets. The ruble remains under strong appreciation pressure and this tendency is likely to be sustained. Ruble liquidity will remain high. Debt and equity markets will continue to diversify. Investors will have new opportunities to invest in a broad range of financial instruments in Russia, ranging from the bond market and mortgage backed securities to more aggressive choices like junior market IPOs, real estate partnership programs, options, and technology start-ups.
Today Russia is more prosperous than at any time in its long and often tragic history. While the Western media often admits that Russia’s economy is growing, it usually insists that Russians have somehow exchanged some of their personal liberties for consumer comforts. Personally, I think that millions of Russians would beg to differ with this “glass is always half empty” assessment. For them, this new wave of prosperity has meant more personal freedoms – to travel, to access the Internet, to start new careers – in short, to pursue happiness.
Last month Deputy U.S. Treasury Secretary Robert Kimmitt visited Moscow to ask the Russian Finance Ministry to invest more of Russia's stabilization fund in America
Solid economic growth, at an average rate of 6.7% Year Over Year (YOY) for nine consecutive years has made the 1998 financial crisis a distant memory. The country is enjoying current account and fiscal surpluses, and has accumulated the third largest pool of cash reserves in the world (almost evenly split between dollars and euros, although increasingly favoring the latter), while building up a Stabilization Fund from extra oil revenues. These cash reserves reached US$405.8 billion and US$120.8 billion, respectively, as of July 1, 2007 and provide the nation with some insurance against declining energy prices.
Consequently, medium term economic risks should be manageable, and Russia now has the wherewithal to tackle its most pressing long term challenges – namely, expanding prosperity to the regions and rural areas, where there is the biggest need for improvement.
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.
Comments
"Domestic demand is now the main driver of growth." Now that is music to my ears... I assume the West can now breath a sigh of relief that Russia isn't reliant on energy exports? I'm so happy that the US, totaly reliant on energy imports, that it was them that shared that advice.
Therefore, if energy did back off a little, maybe driven by a US recession, then this would fuel more "Domestic demand" growth in Russia and it's partners. Sure energy companies would hurt a little, but I don't think we will ever see "dirt" cheap energy again.
This article is a very big contrast when you watch the following exchange between Ron Paul and Ben Bernanke last week.
http://www.politicstv.com/blog/?p=3225#comments
Posted by: Luther G. Quick | July 25, 2007 6:39 AM
Luther, this is a nice thought but the effects on the US from Russian gas domination run through Europe, they arent directly connected to any US dependency on Russia for energy reserves. The issue for the US in terms of diplomacy has more to do with the deteriorating relations between Western Europe and Russia and the fact that the Europeans dont currently have any bargaining chips. This, by proxy effects American interest. Check out this link:
http://www.atlantic-community.org/index.php/articles/view/The_False_Choice_between_Cold_War_and_Warm_Gaslines
Posted by: carlos | July 27, 2007 1:56 AM
Hello Carlos,
Ok read the articel you posted... sorry, it just does nothing for me. Why put Litvinenko and EU energy in the same article? Are the EU and US so out of material that they need to dig so deep to the bottom of this barrle? Sounds to me like the West is desperate.
Anyway...
There is an old business saying, and forgive me for being so crude but it is said "I'm not a whore, I'm a prostitute, PAY ME FOR MY SERVICES". And what this means is, if you ever tried to start a business, people will always scratch at your door looking for a free ride. They want anything and everything for FREE and they will squirm their way with all sorts of creative arguments, bent views, and outright lies to get their free ride.
And in the context of Russia, why is it so many Western leaders and business people get all squirrelly with high blood pressure when Russia simply wants to join the capitalist world? Why is it that the West demands payment for it's services, like a financially responsible prostitute, yet Russia must be the whore?
Gee, isn't that just convenient?
Europe is all worried that Russia might eventualy be on top of this global heap. So, why is it Europe want's to be the boss? or ontop of this heap? Why must Russia be subordinate? Why is it so evil when Russia want to the very same that the US and the EU have? Maybe the right word is HAD.
I hate to ruin people's day, but Russian gas and Russian oil and all Russian resources belong to Russians and will be traded with their allies in more favorable terms. The rest, PAY UP, don't expect a free ride, PAY market price. Dollar hegemony supported by some moron King in Saudi Arabia that wants dollars, this isn't TRUE CAPITALISM... A nation like the United States using hegemony, NGO manipulation of Russia or Belarus isn't true capitalism. What's the matter America? Europe? Scared of competition?
Europe is out of Energy but has an efficient society when it comes to per capita energy consumption. But the US is totally screwed because when dollar hegemony doesn't subsidize US energy, thus skewing production efficiency (in terms of energy), then America's true competitiveness will be reflected in the balance sheet.
This article points out the fantastic financial results of Russia. Whether or not the EU or the US have bargaining chips is all irrelevant. In the minds and hearts of Russians, there is no East or West... that ideology died with the FIRST cold war. It's only the West that uses this new cold war propagate silly missiles defense or gas price arguments in order to somehow reach into Russia or it's allies and take.
Europe's lack of energy is Europe's problem, not Russia's. Russia should not whore itself because the EU burned up it's energy resources. Russia is quite smart because the people are supporting a government that deems none renewable energy as a national security issue. Too bad the US or the EU never considered nationalizing something that can deplete in a generation or two. Don't blame Russia.
Like another one of my analogies, the US and the EU are out of beer, either buy Russian beer or go someplace else, but stop reaching into Russia's refrigerator and taking her beer (oil).
and anyway... don't worry, Russia will lower it's energy exports as she becomes competative and European and American companies move to Russia for cheaper energy costs, for employees with no need of an auto... eventualy, effeciancy will be calculated based on energy, not monetary hegemony.
Posted by: Luther G. Quick | July 28, 2007 5:29 PM
Europe is all worried that Russia might eventually be on top of this global heap.
What really seems to worry others is Russia's unwillingness to help stop political misdemeanours around the world: genocide, war crimes, ethnic cleansing and crimes against humanity (the UN's R2P).
Russia's position was clear in the earlier posting "Diplomatic Saber-Rattling", which included a plea to the West to ignore misgivings about Russia's politics, and instead see only the attractiveness of Russia's finances.
Posted by: IJ | July 31, 2007 3:22 AM
IJ,
I have no clue what you are talking about when you bring up "Russia's unwillingness to help stop political misdemeanors around the world: genocide, war crimes, ethnic cleansing and crimes against humanity (the UN's R2P)"
Excuse me, but who is in Iraq? And maybe we could also talk about human trafficking, but do you know which country is the number one destination? - the US.
There are many hot spots all over the world, and there is a lot of suffering, child soldiers, and so much exploitation from child labor to oil... Chances are, with all highest probability, it's the US that is there for the exploitation...
Anyway, now what is America's solution to all these political misdemeanors around the world? 43 billion $ worth of weapons aid to various countries... just BRILLIANT !!! And the those countries arn't even going to purchase said weapons, this is aid.
Posted by: Luther G. Quick | August 1, 2007 10:06 AM
Luther,
This might help.
What really seems to worry others is Russia's unwillingness to help stop political misdemeanours around the world. . . Russia's position was clear in the earlier posting "Diplomatic Saber-Rattling", which included a plea to the West to ignore misgivings about Russia's politics, and instead see only the attractiveness of Russia's finances. R2P
Posted by: Anonymous | August 2, 2007 6:30 AM
the balance of militery and economic power has already started to shift. history has shown us before how great powers have fallen and the balance of power has shifted with devastating reprucusions.
Posted by: edd77 | December 1, 2007 7:06 AM