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Today, one American dollar buys 32 Russian rubles. Most likely, this is not what Putin envisioned as the result of his economic reforms ten years ago.
Vladimir Putin can be personally credited with a lot of positive developments in Russian economy over the past ten years. Because of Vladimir, today, Russia has private land ownership, functioning banking system, credit system, next-to-zero government debt, and the rising middle class. However, as far as the world is concerned, Russia is still not the investors' dreamland. The little table of ruble-to-dollar exchange rate shows up on all Russian websites and TV screens, and it tells a not-so-good story. In the middle of America's worst financial crisis, the dollar is stronger than ever. Russian ruble, backed by barely any government debt and solid cash flows, is one of the least desirable currencies. When I left Moscow half a year ago, dollar could buy 26 rubles. In the past two weeks, that number has shifted to 32 rubles per dollar.
In the meantime, Russian websites and general population publicly make fun of Putin-Medvedev team and show dissatisfaction with the inability of choosing their own governors, Medvedev's failure to curb the corruption, and the growing wealth of bureaucrats. All the aforementioned problems were supposed to be short-term growing pains of the improving Russia. Instead, the pains became the norm. Why do world's investors chose the American dollar over the Russian ruble? Because American legal and court systems work, secretaries of states and governors earn a fraction of corporate CEOs' salaries, and a speeding driver means a speeding tickets, regardless of whether you're a star, a homeless, or a daughter of a former U.S. president. Maybe in the new decade, the (hopefully) new Russian leaders will take a closer look at Russia's corruption problem and society's needs. As they say, money will come later - it always does.
Microsoft's Moscow office
Do you remember the days when all software in Russia was bootleg and it wasn't worth an effort to try to sell the legal copies? Well, those days are gone. Russian families and businesses finally make enough money to forgo the challenges of viruses and cracking headaches of illegal software, and just pay hard dollars to good old Redmond, WA -based Microsoft.
The piracy is still rampant throughout Russia; but so it is in America, where music artists must hit the road to make income even after their songs reach Top-40 chart positions. Not to compare apples to oranges, but as far as business is concerned, it's all copyright law, respect for the law, and its enforcement. Lady Gaga lost several million dollars on her album release -- mostly due to teenage piracy and lacking sales; 99 cents an album creates a financial loss even on transaction, not counting the fixed costs of production and label's overhead. However, she is the hottest selling show in the world, and that's where the real money is. Even in the Western world where internet is fast and respect for copyrights is low, the money is in "bread and circuses" and not in legal digital downloads.
Given the financial crisis in America and relative financial prosperity in Russia and Brazil, Microsoft is seriously concentrating its efforts on those "developing" markets. Russian market yielded over $1 billion in revenues for Microsoft in just one year, and continues to significantly grow. Microsoft has offices in 70 Russian cities, and its best-selling products in Russia are Microsoft Sharepoint Server and Microsoft Project. Once again, private business proves to be more capable of reset and healthy international relations than our respective governments...
What can Western businessmen learn from the Russian hockey team's plane crash? The obvious: Do not fly Russian-made airplanes. Seriously. On the afternoon of September 7, The Russian-made Yak-42 was carrying 45 people - eight crewmembers and 37 hockey players of Russia's most famous hockey club, "Lokomotiv." Trying to take off, the plane ran the entire length of the runway, traveled another 400 meters on its wheels through the post-runway gravel, rose up, crashed into a light post, hit the ground and burst into flames. Only one person survived the crash. The investigation of the accident so far filtered all the possible options of the crash to one reason: improper load and weight distribution.
Now, the plane is built to carry 120 passengers and luggage. Only 45 people and hockey sticks were onboard. The plane was built in the Nineties, has had all the requisite inspections, and the pilot and copilot had 6,900 and 13,000 hours of flight experience respectively. If an improper load of a suitcase can cause a plane to fall, maybe you need to think twice before boarding such an aircraft. Whatever, the real (or surreal) reasons of the crash are, the statistics work against the Russian airplane industry. There have been five major airplane crashes in Russia in 2011. They cost nearly 200 lives and all of the accidents involved Soviet- and Russian-made planes: Tu-134, Tu-154, An-148, An-24, and now Yak-42.
As usual, Vladimir Putin and President Dmitry Medvedev have spoken tough, demanding new regulations, and promising to solve all the evils of the world. Do not be fooled; nothing will change. Putin and Medvedev have good intentions, but modern-day Russia does not have the system to implement them. In fact, the obvious result of their hands-on governing is the absence of any system. New military missiles don't fly, planes fall out of the sky, and people don't bother to call the police when something wrong happens. Don't participate in this!
There are plenty of reliable airlines in Russia, including Aeroflot that has daily flights from everywhere in Europe and the U.S. to everywhere in Russia and in between. Before booking your flight, just make sure you're going to fly on an aircraft made by Boeing or an Airbus. If a company switches an aircraft to one that's Russian-made, refuse to fly. Even if you end up losing the money, better to be safe than sorry (alive than dead).
Russia Blog extends its condolences to the victims' families and friends.
A census worker surveys Medvedevs at the presidential residence. Not every Russian was surveyed like President Dmitry Medvedev...
Businesses need sound demographic data on which to base investment and marketing decisions, especially in foreign countries. Russia, despite its oil wealth, is a country that would like to attract more foreign investors. But the latest Census there is probably unreliable. At the very base of collection it was substantially invented.
The 2010 Russia Census was unfunded until late in the process. The operation was about to be postponed when Prime Minister Vladimir Putin intervened and found 10.5 billion rubles to pay for it. Now, as official results trickle out a year later, one would think that a big success was achieved. The national newspaper Rossiyskaya Gazeta reports: "Russia's population has declined by 1.6 percent since 2002 - from 145.2 million to 142.9 million people. There are only two regions where the population increased. In the Perm region the population grew by 11,800 people, and in Usolksky - by 800."
Such precision in Usolksky or anywhere in Russia is suspect, however. The U.S. Census Bureau's Center for International Research believes that specific official Russian numbers may be off by as much as 87 percent from site to site. Anecdotally, I've had the chance to witness a census count in both the U.S. and Russia. The two counts couldn't be much different.
Continue reading "You Can't Count on the Russian Census" »
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