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David Cameron is Very, Very Upset About Georgia

Robert Amsterdam — Sun, 17 Aug 2008 16:11:40 +0000

And he wants you to know about it. From his op/ed in the Sunday Times:

First, speaking up clearly and bluntly about what has happened. This is not a time for diplomatic opaqueness. It is a time to distinguish unambiguously between right and wrong. It is a time for democracies to stand together. It is a time for members of our parliament – the seat of one of the world’s oldest democracies – to speak up for one of the world’s newest. Today, in Georgia’s hour of need, this instinct unites government and opposition. Second, we need urgent diplomatic efforts, in which Britain must play a leading role. Russian forces must leave Georgia right away as they are required to do under the ceasefire agreement both sides have signed. Third, Russia must pay a price.

Video: U.S. Defense Secretary on Russia-Georgia War

Robert Amsterdam — Sun, 17 Aug 2008 16:08:53 +0000

Find more videos like this on www.truveo.com.

Russia’s Artful Invasion

Robert Amsterdam — Sun, 17 Aug 2008 15:35:06 +0000

From the International Herald Tribune:

So along with the old-school onslaught of infantry, armor and artillery, Russia mounted joint air and naval operations, appeared to launch simultaneous cyberattacks on Georgian government Web sites and had its best English speakers at the ready to make Moscow's case in television appearances. If the rapidly unfolding events caught much of the world off guard, that kind of coordination of the old and the new did not look accidental to military professionals. "They seem to have harnessed all their instruments of national power — military, diplomatic, information — in a very disciplined way," said one Pentagon official, who like others interviewed for this article disclosed details of the operation under ground rules that called for anonymity. "It appears this was well thought out and planned in advance, and suggests a level of coordination in the Russian government between the military and the other civilian agencies and departments that we are striving for today."

Possible Reprecussions for Russia

Robert Amsterdam — Sat, 16 Aug 2008 19:46:38 +0000

Everyone is aware that Washington is not about to send the Marines into Georgia to assert its regional interests, but what are the realistic diplomatic and economic penalties that could be leveraged against Russia? The Bush Administration will be looking to save face, but as we have speculated, its range of options is rather limited. The Wall Street Journal elaborates a couple of ways that Russia may find itself punished for the war in Georgia:

Western authorities should also explore the vulnerability of Russian assets abroad. At the least, they can make life difficult for the holders of those assets. Post-Soviet Russia allowed the emergence of businessmen and entrepreneurs who indeed wish to function as normal participants in world commerce. Their number, however, assuredly includes the lucky billionaires under Mr. Putin's protection. All of them want to benefit from the West's rules. That privilege should be restricted so long as Mr. Putin breaks the rules. In the world of global commerce, reputation matters. China has calculated that its own ambivalent reputation can only gain from staging the Olympic extravaganza. The glow of the Games is money in the bank. By contrast, the Putin government has embarked on a strategy that seems to believe its power grows in sync with its reputation as an international pariah, an outsider state. Mr. Bush said Friday that "Russia has damaged its credibility and its relations with the nations of the free world." True, and if the West remains firm, it can make clear to Mr. Putin that the political price of behavior beyond the pale of normal relations is high. Overrunning Georgia was easy. Life after that should not be.

Drilling Offshore to Affect World Oil Prices… and other Tales from the Iraq-Pakistan Border [0]

Menzie Chinn — Sat, 16 Aug 2008 17:15:18 +0000

Various individuals have argued for drilling in the Outer Continental Shelf (OCS) as a means to affect the price of oil. This is true despite this recent assessment by the Department of Energy's Energy Information Administration, the Federal Government's nonpartisan analytical group on energy issues. From Annual Energy Outlook related analyses (June 2007):

The OCS is estimated to contain substantial resources of crude oil and natural gas; however, some areas of the OCS are subject to drilling restrictions. With energy prices rising over the past several years, there has been increased interest in the development of more domestic oil and natural gas supply, including OCS resources. In the past, Federal efforts to encourage exploration and development activities in the deep waters of the OCS have been limited primarily to regulations that would reduce royalty payments by lease holders. More recently, the States of Alaska and Virginia have asked the Federal Government to consider leasing in areas off their coastlines that are off limits as a result of actions by the President or Congress. In response, the Minerals Management Service (MMS) of the U.S. Department of the Interior has included in its proposed 5-year leasing plan for 2007-2012 sales of one lease in the Mid-Atlantic area off the coastline of Virginia and two leases in the North Aleutian Basin area of Alaska. Development in both areas still would require lifting of the current ban on drilling.
For AEO2007, an OCS access case was prepared to examine the potential impacts of the lifting of Federal restrictions on access to the OCS in the Pacific, the Atlantic, and the eastern Gulf of Mexico. Currently, except for a relatively small tract in the eastern Gulf, resources in those areas are legally off limits to exploration and development. Mean estimates from the MMS indicate that technically recoverable resources currently off limits in the lower 48 OCS total 18 billion barrels of crude oil and 77 trillion cubic feet of natural gas (Table 10).
Although existing moratoria on leasing in the OCS will expire in 2012, the AEO2007 reference case assumes that they will be reinstated, as they have in the past. Current restrictions are therefore assumed to prevail for the remainder of the projection period, with no exploration or development allowed in areas currently unavailable to leasing. The OCS access case assumes that the current moratoria will not be reinstated, and that exploration and development of resources in those areas will begin in 2012.
Assumptions about exploration, development, and production of economical fields (drilling schedules, costs, platform selection, reserves-to-production ratios, etc.) in the OCS access case are based on data for fields in the western Gulf of Mexico that are of similar water depth and size. Exploration and development on the OCS in the Pacific, the Atlantic, and the eastern Gulf are assumed to proceed at rates similar to those seen in the early development of the Gulf region. In addition, it is assumed that local infrastructure issues and other potential non-Federal impediments will be resolved after Federal access restrictions have been lifted. With these assumptions, technically recoverable undiscovered resources in the lower 48 OCS increase to 59 billion barrels of oil and 288 trillion cubic feet of natural gas, as compared with the reference case levels of 41 billion barrels and 210 trillion cubic feet.
The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030. Leasing would begin no sooner than 2012, and production would not be expected to start before 2017. Total domestic production of crude oil from 2012 through 2030 in the OCS access case is projected to be 1.6 percent higher than in the reference case, and 3 percent higher in 2030 alone, at 5.6 million barrels per day. For the lower 48 OCS, annual crude oil production in 2030 is projected to be 7 percent higher -- 2.4 million barrels per day in the OCS access case compared with 2.2 million barrels per day in the reference case (Figure 20). Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant.
Similarly, lower 48 natural gas production is not projected to increase substantially by 2030 as a result of increased access to the OCS. Cumulatively, lower 48 natural gas production from 2012 through 2030 is projected to be 1.8 percent higher in the OCS access case than in the reference case. Production levels in the OCS access case are projected at 19.0 trillion cubic feet in 2030, a 3-percent increase over the reference case projection of 18.4 trillion cubic feet. However, natural gas production from the lower 48 offshore in 2030 is projected to be 18 percent (590 billion cubic feet) higher in the OCS access case (Figure 21). In 2030, the OCS access case projects a decrease of $0.13 in the average wellhead price of natural gas (2005 dollars per thousand cubic feet), a decrease of 250 billion cubic feet in imports of liquefied natural gas, and an increase of 360 billion cubic feet in natural gas consumption relative to the reference case projections. In addition, despite the increase in production from previously restricted areas after 2012, total natural gas production from the lower 48 OCS is projected generally to decline after 2020.
Although a significant volume of undiscovered, technically recoverable oil and natural gas resources is added in the OCS access case, conversion of those resources to production would require both time and money. In addition, the average field size in the Pacific and Atlantic regions tends to be smaller than the average in the Gulf of Mexico, implying that a significant portion of the additional resource would not be economically attractive to develop at the reference case prices. [Emphasis added -- mdc]

Here is Figure 20 from the report, showing the impact on lower-48 production in the baseline and the alternative.

Figure 20 from Annual Energy Outlook related analyses (June 2007).

What exactly is "insignificant"? One can get an idea by doing a back of an envelope calculation. The 3% increase by 2030 cited by the 2007 Annual Energy Outlook analysis works out to 0.163 millon barrels per day (mbpd) incremental production. Projected world output of conventional oil in 2030 is 99.30 mbpd. This means access to the OCS would result in a 0.164% increase in output.

Let's appeal to a supply-demand framework, assuming log-linearity:

q^s = a₁ + a₂p^s + a₃X

q^d = b₁ + b₂p^d + b₃Z

Where q is log quantity, p is log price, X and Z are other shift variables, assumed to be exogenously determined. a_i and b_i are parameters, a₂ > 0 and b₂ < 0. Z could be income, for instance.

Solving the simultaneous system of equations for the equilibrium price leads to:

p = (a₁-b₁)/(b₂-a₂) + (a₃X-b₃Z)/(b₂-a₂)

Taking the total differential and holding constant the shift variables X and Z leads to the following expression:

Δp = (Δa₁-Δb₁)/ (b₂-a₂)

Substituting in some parameter values, taking Δa₁ as the percentage increase in supply, namely 0.164% (0.00164), and setting the price elasticity of demand equal to -0.4, and and price elasticity of supply to 0.3 (Perloff and Whaples has cited these figures; plausible alternative parameter values would not alter the results in a qualitative fashion) yields the following: The resulting change from baseline in 2030 is -0.00234 (-0.23%). Taking the AEO 2008 baseline estimate of 70.45 2006$/barrel in 2030, the implied reduction in price is 0.165 2006$.

Now let's conduct some sensitivity analyses/robustness checks.

Intertemporal Considerations

There have been some assertions that driving down prices in the future will have an impact today. Since petroleum is durable, there is no doubt that this must be true; the question, as always, revolves around the quantitative magnitudes. Take the 2030 impact on today; one can calculate the present value of the innovation: (1+r)²². Take r = .027 (which is the average ten year constant maturity yield minus the lagged one year inflation rate over the 1976-2008 period), one finds that the 0.165 2006$ decline in 2030 results in a 0.106 2006$ decrease today.

Alternative Estimates of Reserves

As pointed out in several venues [1], there is some debate over the amount of technically recoverable oil in the OCS that currently not accessible; the CS Monitor editorial argues that there's been a big revision in estimation technologies. That may be, but here is a quote from the February 2006 report to Congress from the MMS of the Department of Interior (page xii):

Many proponents of domestic energy security consider gaining increased access to Federal resources to be one of the biggest challenges. Part or all of nine OCS planning areas, which include waters off 20 coastal states, have been subject to longstanding leasing moratoria enacted annually as part of the Interior and related agencies appropriations legislation, or are withdrawn from leasing until after June 30, 2012, as the result of presidential withdrawal (under section 12 of the OCSLA). Some of these areas contain large amounts of technically recoverable oil and natural gas resources. The MMS estimates that conventional oil and gas resources (i.e., UTRR) in OCS areas currently off limits to leasing and development total 19.1 Bbo and 83.9 Tcfg (mean estimates). There remains today, considerable uncertainty concerning the resource potential of many of these OCS areas. The availability of additional modern G&G data could reduce this uncertainty. It is instructive to note that perceptions concerning the resource potential of the Central, Western and portions of the Eastern GOM, areas experiencing robust levels of exploration and production effort, have continued to evolve for the better over the years. Critical to the changing perception is the fact that the MMS has acquired approximately 1.75 million line-miles of two-dimensional (2-D) common depth point (CDP) seismic data and nearly 300,000 square miles of 3-D seismic data. However, the additional G&G data and information that become available to assessors between assessments is frequently mixed in terms of having a positive or negative effect on the perception of the overall hydrocarbon potential of the OCS.

This implies that the EIA's base assumptions do not appear unreasonable, on the face of it.

Alternative Elasticities

The calculations rely upon long run elasticities, and a constant elasticity along the curves (Note: linear demand and supply curves do not exhibit constant elasticities.) If the supply curve in log-price/log-quantity space was still backward L-shaped, and the supply enhancement occurred with demand intersecting along the near-vertical portion, then the price change would be larger.

What about short run effects (in 2030 say)? When new suppy comes on line, the resulting deviation in price from baseline will be commensurately larger in the short run. But by definition, over the longer horizon, prices will gravitate toward those indicated by the long run analysis.

Alternative timing

The calculations I presented focus on 2030. One could examine the effcts earlier. But as shown in Figure 20 (reproduced above), production does not even begin until 2017 assuming leasing begins in 2012 (less than four years from now!). Even assuming the 2030 effect is achieved in 2020, that would mean the resulting change in today's prices would only be 0.12 2006$ per barrel.

Strategic Interactions

Reader Anon (in commments to this post) argues against my critique of offshore drilling arguments using a game-theoretic framework:

You are wrong. Opening up more acreage to exploration will affect psychology and markets. let me explain.
A credible threat of increased supply - even ten years away - certainly does have immediate impact to the ruminations of energy policy makers from Russia to Saudi to Mexico.
If you have a large control over marginal supply (Mideast/Russia/Mexico could all do a lot more if they choose to) and you see the glimmer of another North Sea or another ANS then you rightly might adjust your policies. Strategically speaking, if you dominate global oil supply then at some price point you rightly begin to fear Competitive Entrants.
...
In the case of Oil (by no means a free market), governments control access to resources (sell it like real estate and demand whatever they like or in many cases simply make everything off limits to private capital). However, if you push oil importing nation governments too far with overly high prices then you just might trigger competition.
I hope this makes it clear that the main reason we pay such high oil prices today is the government RESTRICTED ACCESS to reserves (a global phenomenon) that has tended to dominate the oil industry landscape for so long. The secure knowledge that the US Government is EXTREMELY UNLIKELY to open up new reserves for exploitation is enough to keep exporting nations confident that they can safely continue to extract higher rent for their commodity.
So just the credible threat of a surge in new competition (a la Bush statement) may be enough to open the taps a bit more or cause a flurry of counter-competitive increased supply activity to quickly try to KILL the new threat or frighten off competitive capital investment in new supply..
...
Think Strategically. BTW - I condemn Bush for many things and I sympathize with your attitude towards this administration, however, for once, Bush is actually right this time!
...

Anon admonishes me to read Barry Nalebuff's book Thinking Strategically (actually it's Dixit and Nalebuff); I confess I have not yet done so. But having endured some amount of game theory over the years, I'm going to wade ahead nonetheless.

First, consider this exchange from April 2004, where Nalebuff suggests investing $5 billion to enable Iraq's oil industry to export a million extra barrels of oil a day, thereby negating OPEC's monopoly power. One interesting aspect of Nalebuff's argument is that he doesn't propose something like exploiting US offshore reserves. I think the reason is quite simple, and is rooted in game theory -- Iraq in principle can be a low cost producer (after security is established). Supply from offshore sources in the US would be (and is known to be) a relatively high cost (per unit production) venture relative to, say, Saudi oil production. Hence, it's not clear increasing US production can have the strategic effect often suggested. (Example, see: [2])

I do agree with Anon that a lot of world production is undertaken by state owned enterprises, which lack proper incentives for responding to price signals. But I'm unconvinced that foreign state owned enterprises would be privatized simply because the US removed its moratorium on OCS exploitation.

So, opening up production in the currently inaccessible areas of the OCS might have substantial effects (perhaps on trade balance, or oil company profitability, Federal leasing revenue), but in my view is unlikely to have a substantial impact on oil prices (just as in the case of opening up ANWR).

As an aside, John McCain is still supporting a gasoline tax holiday [3], so on this count, I remain puzzled.

Technorati Tags: oil prices, outer continental shelf, offshore drilling, oil reserves, elasticities.

International Law and the War

Robert Amsterdam — Fri, 15 Aug 2008 19:42:06 +0000

Although the dust is far from settled in Georgia, and indeed I am getting firsthand reports of ongoing Russian troop movements, we will soon have to begin taking a serious look at the international law implications of this military action, and ask some tough questions about 1) the legal status of South Ossetia and Abkhazia pre- and post-conflict, 2) the status of Russia's "peacekeeping" mission and their range of duty, and 3) the legal basis for the deployment of Russian troops into Georgian sovereign territory. Although the Kremlin PR machine sputtered and coughed in the early days of the war, things are really catching up now (there are three separate articles attacking the Georgian cause in the Washington Post alone today). However one of the earliest and most important pieces was a by-lined article by Russia's Foreign Minister Sergei Lavrov published in the Financial Times back when Gori was still burning, outlining the Russian legal view on the invasion. Lavrov's piece argues the following: "Russia responded to this unprovoked assault on its citizens by launching a military incursion into South Ossetia. No country in the world would idly stand by as its citizens are killed and driven from their homes. Russia repeatedly warned Tbilisi that it would protect its citizens by force if necessary, and its actions are entirely consistent with international law, including article 51 of the UN charter on the right of self-defence." However, can the Russians successfully describe the war as a humanitarian intervention? Article 51 states that nothing "shall impair the inherent right of individual or collective self-defence if an armed attack occurs" - meaning that Lavrov appears to be implying that South Ossetia comprises part of the Russian Federation, and that the only goal of the military incursion into Georgia was the protection of Russian citizens. The charge of "ethnic cleansing" therefore becomes essential to the Russian legal position. With these questions in mind, I had a chat with one of the world's foremost expert on international criminal law and peacekeeping missions (and an affiliate of my law firm) Geert Jan Alexander Knoops, who has testified before the international criminal court on Rwanda and the Supreme Court on Hamdan vs. Rumsfeld, to get an idea of his view of the status of the Russian case for war.

Why Attempts to Isolate Russia Won’t Work

Robert Amsterdam — Fri, 15 Aug 2008 18:13:48 +0000

President Bush seems quite confused as to how he can wield any influence whatsoever over Russian conduct in Georgia. His latest statements find him actually having to repeat his requests for the withdrawal of Russian troops from Georgia, and even whining about Russian "bullying." (hint: only the bullied talk about bullying.) Unlike the West, the Russian response with regard to Georgia ever regaining their U.N.-recognized sovereignty over the breakaway provinces has been swift and unequivocal: fuhgettaboutit. Now the latest news is that the maverick foreign policy minds of the Bush Administration are working on a clever new strategy to "isolate" Russia as punishment for invading Georgia. Who does he think he's kidding?

The Return of Russian Hegemony

Robert Amsterdam — Fri, 15 Aug 2008 17:24:36 +0000

If you believe that John Bolton has never said or written something you didn't vigorously disagree with, then you probably haven't done enough research. However the razor-tongued former U.S. Ambassador to the United Nations is now safely packed away in the private sector (working alongside Ken Starr at Kirkland & Ellis), where he can speak with a great amount of autonomy to air his indiscriminate grievances ... which always makes for good reading. This guy does not speak the language of nuance, but when he says that this is indicative of how Russia intends to conduct foreign policy for the coming decade, we should listen up. Here's his bit on the Russian objective with the invasion of Georgia:

Russia Hedge Fund Guide

Richard C. Wilson — Fri, 15 Aug 2008 15:27:54 +0000

Russia Hedge Fund Guide

Guide to Russian Hedge Funds

Here is a short guide collection of articles on the hedge fund industry in Russia. I am always looking for more valuable online tools and resources to add to these geographical guides to the hedge fund industry. If you have a white paper or PowerPoint that I can include here please send me an email and I will post it for everyone's benefit.

Excellent New York Times article about a Russian multimillionaire, his hedge fund, and America
Russia dominates the list of leading hedge funds
Good summary from Hermitage Capital Management about hedge funds in Russia
Russia Hedge Funds 2008 Event in Switzerland
“Russia’s hedge fund managers: The long, the short and the tall”
Informative June 2008 Russian Hedge Fund analysis
A link to one of the largest and most influential hedge funds based out of Russia
“Russia Diversified: Hedge Funds Hone In On Growth Story”
New Russian-focused hedge fund launched by UFG Asset Management
Green light coming to hedge funds in Russia
“Russia-focused fund becomes first listing on London’s Specialist Fund Market”
Another Russian Hedge Fund Event
An Explosion of Business Schools in Russia
Alternative Investment Summit Russia 2008
Singapore-based hedge fund with $1 billion assets to invest in Russian infrastructure
Article titled “Hijacking the Hermitage Fund"
Good and informative Question and Answer with Russian hedge fund manager
DFJ launches the first US-Russia venture fund

- Richard

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TGIF — Charts and News

Sean Brodrick — Fri, 15 Aug 2008 13:02:25 +0000

Man, this has been such a wild week, Friday couldn't come soon enough. Let's look at some charts, starting with one we've been following all week -- the US dollar.

The US dollar has definitely broken above that weekly downtrend. A pullback and test of that support wouldn't surprise me. This breakout opens the door for a rally in the dollar to the 80+ level.

And naturally, the rally in the greenback is kicking gold lower ...

Gold could make a stand here. But the bullishness in the dollar tends to tell me that gold will go down to test that weekly uptrend I've marked as (2).

Now, let's look at the CRB Index, a broad commodity index (though it is weighted heavily toward energy) ...

It is testing support as well. So, maybe this will bring a rally early next week. I think I've pointed out why that rally could fade quickly.

And sure, energy could lead the rally. But pay attention to agriculture -- that's where I'm seeing some real bullishness right now.

IN OTHER NEWS ...

URANIUM

Cameco Cuts Production Target by 1 Million Pounds
Cameco said its share of uranium production for 2008 is now projected to total about 19.6 million pounds of U3O8, down from the previous forecast of 20.6 million pounds of the fuel used to power nuclear generating plants.

XX Sean’s note – good thing Cameco got that sweetheart, hush-hush deal to resell 550 tonnes of Iraqi uranium, or it might have to cut its production target even more, eh? Now, how’s your money bet on Cameco cutting its production target again? Do you feel lucky?

Uranium One Reduces Production Targets Of Dominion Mine
The company said that it expected to produce 320,000 lb of uranium from Dominion this year, compared with a previous forecast of 590,000 lb.

XX Sean’s note – A slew of companies have cut production targets. Keep an eye on the spot market over the next couple weeks and let’s see if utilities are getting nervous.

Raids Suggest Russia Targeted Energy Pipelines
A neat row of large craters in a field in southern Georgia strongly suggests that Russia dropped bombs near oil and gas pipelines bringing fuel to the West.

XX Sean’s note – this story is in the Wall Street Journal, which hands its political reporting over to crackpots and wingnuts, so take it with a grain of salt. Also, while Russia won the war on the ground, Georgia has won the information war hands-down. On the other hand, would you put it past the Russians to bomb Georgian pipelines? I sure wouldn’t – I think Russia is trying to build a new Empire of Energy. The only question in my mind is, if this is true, why didn’t Russia follow through?

US Economy

U.S. Industrial Production Unexpectedly Gains 0.2%, Led by Cars, Metals Industrial production in the U.S. unexpectedly rose in July, helped by gains in automobiles, metals and machinery.

CHINA

China's Factory, Property Spending Growth Quickens on Disaster Rebuilding China's factory and property spending growth accelerated, fueled by rebuilding after the Sichuan earthquake in May and snowstorms in January and February.

COMMODITIES

Silver, Oil, Wheat, Copper Plunge as Dollar's Rebound Saps Commodity Boom Gold plunged below $800 an ounce, platinum posted the biggest drop in almost seven years and oil, corn and copper slumped as the dollar's rebound reduced the appeal of commodities after a six-year boom.

OPEC Leaves 2009 Oil Demand Growth Estimate at Lowest Rate in Seven Years The Organization of Petroleum Exporting Countries, the supplier of more than 40 percent of the world's oil, left its forecast for 2009 oil demand growth unchanged at the lowest rate in seven years and warned that consumption may fall further.

OPEC's 2008 Oil Revenue to Exceed U.S. Income Tax Receipts: Chart of Day OPEC is pulling in more money from oil sales than the U.S. government is raising from individual taxpayers.

Energy Blast – Aug 15, 2008

Robert Amsterdam — Fri, 15 Aug 2008 12:31:06 +0000

A Moscow court has banned Robert Dudley, the TNK-BP joint venture’s chief executive, from working in Russia for two years. Dudley plans to continue managing the company from abroad. Some analysts maintain that the war is not about oil. New evidence reportedly “strongly suggests that Russia dropped bombs near oil and gas pipelines bringing fuel to the West.” BP has resumed exports of Azerbaijani natural gas through its South Caucasus pipeline across Georgia. Georgia’s pipelines remain vulnerable.

Today in Russian Business – Aug 15, 2008

Robert Amsterdam — Fri, 15 Aug 2008 12:29:37 +0000

A number of big Wall Street banks are reportedly becoming “increasingly nervous that Russia’s high-risk, high-reward environment is becoming too much about the risk.” US electronics chain Best Buy Co will begin expanding into Russia. Russian aircraft company MiG held its first meeting to discuss its massive liabilities.

RA’s Daily Russia News Blast – Aug 15, 2008

Robert Amsterdam — Fri, 15 Aug 2008 12:08:46 +0000

TODAY: War uproots 100,000; irregular add-ons to Russian army are “terrorizing”; aid workers having trouble accessing areas; Vitaly Churkin says Russia’s role in Gori was humanitarian; Rice to visit Tbilisi; US and Poland agree on missile shield; “the Obama angle”. The war between Georgia and Russia has reportedly uprooted more than 100,000 people. Georgia said Russian troops still control one-third of the country, and that the Russian army has brought in “thousands and thousands of irregulars” who are terrorizing the country. Humanitarian aid groups and UN monitors are reportedly unable to reach large parts of Georgia due to insecure conditions, and Human Rights Watch says it has evidence that Russia used cluster bombs in civilian areas of Georgia. Russia’s claims of “genocide” in South Ossetia are coming under question. In the eyes of Russian citizens, their country is “the peacemaker”. Vitaly Churkin, Russia’s UN Ambassador, says that Georgia’s strategic city of Gori should not be classified as being “in ruins” because it still has running water and electricity, and classifies Russian troop action there as “humanitarian”. Russian troops are again stationed in the city, having previously retreated, and journalists are reportedly coming under fire there.

Profit Opportunities From the New Cold War

Martin Hutchinson — Thu, 14 Aug 2008 22:01:39 +0000

By Martin Hutchinson Contributing Editor Like it or not, with the invasion of Georgia, we have a new Cold War – as well as the profit opportunities that accompany such a conflict. ... Money Morning is here to help investors profit handsomely on...

Jonathan Sanders: The Olympic Warlet

Robert Amsterdam — Thu, 14 Aug 2008 18:39:01 +0000

[One of the best things about running a blog is that friends and colleagues will often contact me to ask if I will publish an occasional guest contribution. The following comes from the respected veteran journalist, author, and academic Jonathan Sanders, Ph.D., whose expertise on Russia and the countries of the former Soviet Union ranks among the best. I'm grateful for this interesting contribution. - Bob Amsterdam] The Olympic Warlet By Jonathan Sanders Little wars – “warlets” – in obscure far-off places teach sharp, if unromantic lessons. The Olympic warlet – the firefight-turned-invasions of the enclaves of South Ossetia and Abkhazia that began on 6 August (another intelligence failure by the US military, with satellites looking down and some hundred agents on the ground looking up; either the agents were blind or failed to take the Putin-revived military seriously – this is the biggest blunder of this type since the Americans were asleep at the switch in December 1979 when Brezhnev and Company exercised their wet dreams of warm weather beaches and pretty Afghan maidens) – demonstrates even to the most election-campaign-fueled American patriots the folly of including a place like Georgia in NATO. Ronald Regan would ask a simple question: would you risk NATO-backed thermonuclear war to defend South Ossetia?

Grigory Pasko: Watching the War from Moscow

Robert Amsterdam — Thu, 14 Aug 2008 18:13:25 +0000

For some – war, for some – mother is dear (Russian saying) Grigory Pasko, journalist This sure was a strange war. It was clear right from the start that nobody – besides several politicians – needed it. Several politicians – that would be Saakashvili, Putin, and Medvedev. By the way, the last of these no doubt also did not take part in all the decisions: senior comrade Putin simply ordered him to say this, to behave himself like that and no other way. Saakashvili was pursuing a goal: to attract the attention of the world public to a region of republics not recognized by anyone – South Ossetia and Abkhazia. Formally, they are counted in the composition of Georgia, in practice – they are protectorates of Russia. In South Ossetia even the leadership of the republic – is all Russian. The war ended quickly, like it had begun. A mass of political scientists is already extracting political lessons from it. But I want to bring attention to certain aspects, which, as a rule, remain in the shadows. (Photo: Warriors of the Russian Army - source)

Understatement of the Week

Robert Amsterdam — Thu, 14 Aug 2008 17:31:13 +0000

This quote I dare say is the understatement of the week (hat tip to our editor): "Now Russia's defeat of Georgian forces who tried to retake the breakaway region of South Ossetia, and its backing of rebels who pushed Georgian troops out of Abkhazia, will make it even less likely Georgia will lift its opposition to Russian membership in the world trading body."

Tremendous Bitterness Against the United States

Robert Amsterdam — Thu, 14 Aug 2008 17:16:59 +0000

The New Republic has a rather acerbic but interesting interview with Charles Fairbanks, a senior fellow at the Hudson Institute and former deputy assistant secretary in the Department of State. We completely agree with him that the Bush administration's Iran obsession is really allowing the Russians to completely distort the balance of power in the relationship.

How would you characterize the U.S. response to the crisis? Could the administration be doing more? This is a huge event. It really alters the international landscape, and the backgrounders that came out of the State Department talk as though it's just another little outbreak of instability in the third world. There's no realization that this is an event like the Soviet invasion of Afghanistan in 1979. The real test of the Bush administration's policy will come in the next months--whether there is any fundamental adjustment to totally new realities in our relationship with Russia and in our awareness of the problems with the Georgian government. How will the U.S. and the world engage with Russia, after its willingness to assert itself geopolitically has reared its head so violently? The Bush administration is mesmerized by the goal of getting Iran from acquiring nuclear weapons, and that's indeed a tremendously important thing to do. But there is a very real question of whether it can be done at all, and one has the impression from backgrounders and conversations that the dominant consideration in the handling of this [Georgia] crisis was to not offend Russia too much, to get cooperation above all on the Iranian nuclear issue. That seems to me very short-sighted because Russia is victorious, and they think, even if we don't, that we lost a war. The result is that Russian cooperation will come at a higher price on every issue.

The Cost of Russian Empire

Robert Amsterdam — Thu, 14 Aug 2008 16:38:47 +0000

Carlos Alberto Montaner has a new piece on PostGlobal:

Among the reformists close to Kozyrev there was a certainty that the conquest of the world had been too costly and counterproductive an enterprise. And another key idea had blossomed: the West should not be fought but embraced, imitated and invited to invest. Russia should compete within the rules of the game of market capitalism. Those diplomats understood that Russia did not have to become anybody else's counterweight, or play into a bipolarity that could only bring the nation conflict and poverty. After all, Russia was the largest nation in the West, the third Rome (the second had been Constantinople) and it made no sense to adopt an attitude of hostility toward a world that was as much theirs as it was France's or England's. All this is apropos Russia's attitude in the conflict between Georgia and South Ossetia. It is very probable that Georgian President Mikheil Saakashvili acted rashly when he attacked South Ossetia in an effort to reconquer that territory, but it seems evident that Moscow had been waiting for an opportunity to strike. The attack on Georgia began on Aug. 8. On July 20, 19 days earlier, the Russians already knew Saakashvili's plans and had unleashed a cyberwar intended to dismantle the communications of their ill-tempered neighbor via the Internet. It was a magnificent moment to teach a lesson to the Georgians and the rest of the world, most especially the United States, who were sponsoring Georgia's admission to NATO.

Russia’s Political Folly

Robert Amsterdam — Thu, 14 Aug 2008 16:07:20 +0000

In a letter to the Times, an academic notes that the invasion of Georgia may have been a short-term victory and long-term loss for Russia's regional interests:

Re “Russia’s War of Ambition” (editorial, Aug. 12): While militarily a success, Russia’s incursion into Georgia to reassert its sphere of influence in the “near abroad” is political folly. The Russian-Georgian conflict has likely pushed Georgia out of the Commonwealth of Independent States. The Baltic states, Poland and Ukraine, whose leaders have traveled to Georgia to express solidarity with President Mikheil Saakashvili, will distance themselves further from a domineering, oil-resurgent Russia. Russian military might has won the day in Georgia, but as a means of extending its influence in the region, political pressure and persuasion would have been far more effective. Lawrence P. Markowitz Oberlin, Ohio, Aug. 12, 2008

Energy Blast – Aug 14, 2008

Robert Amsterdam — Thu, 14 Aug 2008 12:48:06 +0000

Russia’s antitrust watchdog has found Mechel guilty of breaking competition law, and could fine it up to $130 million. The company may also have to cut prices by 30%. Petroneft has agreed a deal with Arawak Energy to jointly pursue new opportunities in the West Siberian region of Russia. The Moscow Times says that the Baku-Tbilisi-Ceyhan oil pipeline closed two days before the outbreak of conflict in Georgia. Power utility RusHydro reported a 40% year-on-year rise in net profit for the first half of 2008. If the anti-monopoly agency gets its way, Gazprom may be forced to share export pipelines with independent producers.

RA’s Daily Russia News Blast – Aug 14, 2008

Robert Amsterdam — Thu, 14 Aug 2008 12:28:41 +0000

TODAY: Russian troops move into Gori; UN may approve peace proposal by end of week; Russia will not recognize Georgia’s territorial integrity; war of words rages on; HRW questions Russia’s death toll; White House struggling to find means of retaliation; Yushchenko moves to restrict Russian warships. Despite all news suggesting the contrary, Russia's troop withdrawal from the strategic city of Gori has appeared to collapse, with explosions being heard there today. The French-drafted Security Council proposal to end hostilities between Georgia and Russia may be approved by the UN Security Council before the end of the week. A text of the agreement has been published by the New York Times. Russia has declined to acknowledge Georgian sovereignty over all of its recognised territory and refused to have any reference to it in the peace proposal. The war of words between Russia and Georgia continues. Deputy Russian Prime Minister Sergei Ivanov has compared Georgia’s initial move for South Ossetia with 9/11, implicitly comparing its response with the US invasion of Afghanistan. Georgian President Mikheil Saakashvili writes in today’s Washington Post. “Georgia's only fault in this crisis is its wish to be an independent, free and democratic country.” Elsewhere Saakashvili has resorted to “increasingly fiery language”. Human Rights Watch has called Russia’s use of the word genocide in reference to the conflict “irresponsible”, and questioned the accuracy of its South Ossetian death toll.

U.S. Economy’s Mascot: Grizzly Bear

Michael Michaud — Thu, 14 Aug 2008 11:33:00 +0000

08/08/08 The long-awaited Summer FINANCIAL Olympic Games has begun. Hosted by the August 2008 Elliott Wave Financial Forecast, this event showcases the world’s leading economic athletes as they compete in the race toward opportunity.

Here are just a few of the event’s most show-stopping details:

Diving into investment pools: The July 2006 Elliott Wave Financial Forecast warned against big banks diving headfirst into Collaterized Debt Obligations -- and wrote: “Banks will find themselves with a shared interest in broken down pools of defaulted mortgages and or other ‘synthetic’ CDO’s which will not be worth the paper they’re written on.”

On July 28, 2008 Merrill Lynch joined the long line of battered, bulge-bracket firms by writing down 75% of its CDOs. Now, our analysts reveal what kind of “splash” asset-price deflation will make on the overall economy.

Synchronized Stock-Market Swimming: The Dow Jones Industrial Average set an all-time high in October 2007, but the Dow Utilities and Dow Transportation Averages didn’t reach their peaks until May and June of 2008 -- Bullish divergence OR belated topping process? Our original close-ups send a clear message: ALL three Dow Indexes will soon be aligned to one side.

“[Red] Parade of Nations” The August 2007 Elliott Wave Financial Forecast cautioned against widespread faith in overseas markets becoming an “antidote to the bear.” We said: “Falling prices lie directly ahead for most foreign markets as… U.S. investors are stuffed to the gills with stocks from far away place.”

Today, the financial flags of the world hang LOW as an “economic tempest takes over Europe,” Pakistan, India, Russia, China, and the U.S. The way we see it, the next stage of the global trend will enter unchartered territory.

The Financial Olympic Mascot: Grizzly Bear? In the August 2008 Elliott Wave Financial Forecast, our analysts show how the leading economic sectors will “score” in the months ahead.

Get instant access today.

The Torch of Consumer Spending Burns Out: The $100 billion (and counting) tax rebate checks have been about as “stimulating” as a tranquilizer. Case in point: A telling chart of the U.S. Savings Rate over the past four decades reveals a strong up-tick since 2005 -- alongside a similarly telling DROP in the 13-week Rate of Change for Money Supply (M2). Is it time to stash your money in cash?

Yellow Ring: Last month, the July 2008 Elliott Wave Financial Forecast presented the following GOLD insight: “As we go to press, sentiment is still allowing for plenty of downside potential.” Now, with gold prices more than $100 BELOW their July 14 peak, our analysts compare the precious metal market to the “higher-beta junior mining issues.” Are precious metals REALLY a safe place to hide?

“Black-GOLD” Medal: The July 2008 Elliott Wave Financial Forecast was loud and clear: “Energy trading has reached an important mania era endpoint.” From its July 11 all-time high, crude oil has plunged 20% to a three-month low, alongside the biggest drop in the CRB Commodity Index in 28 years. According to the August publication, “sentiment” has reached a perfect set-up for one kind of move.

Believe it or not, that’s just the Opening Ceremony. Get the entire Financial Forecast Service today and stay in front of the long-term trend changes in store for hedge funds, housing, financials, bonds, the U.S. dollar, silver, fashion, movies, and still more.

Click here for a risk-free subscription.

Emerging markets indexes.

Vlada Kynsky — Wed, 13 Aug 2008 19:27:00 +0000

Japan economy posted negative growth -0.6%. After Canada and Italy it is the third economy in G7 group which is not in expansion. Tomorrow the GDP statistics are released for countries of Euro zone.

Last days China is in focus. Unexpectedly high inflation and slowing economic growth dragged Shanghai Composite index 55% from October high.

Another hot stock markets in Viet nam lost all the attractiveness. Country joined World Trade Organization and VNINDEX was one of the best performing in the world. But now country fights with hyper-inflation which is now 25%.

Another emerging markets hit in last days is Russia. Political situation and plunging commodity prices outflow money from market and currency Rubl. These factors make recently RTS index as the worst performing emerging index.

Commodity driven Brazilian index had been averse to global slowdown. But as crude and copper prices are under correction Bovespa index could sustain growth.

Related tickers: (FXI), (RSX), (EWZ)

MARKET COMMENT August 11, 2008 Yeah, I’m one bad dude!

David Fry — Tue, 12 Aug 2008 00:49:51 +0000

MARKET COMMENT August 11, 2008 Yeah, I’m one bad dude! What passes for normal reactions always seems to surprise. You would think with Russia’s ongoing attack on Georgia plus a US naval strike force arriving in the Persian Gulf oil prices and gold would rise since supplies and stability are threatened. But no; evidently market action now revolves around the dollar rally and is blind to everything else.

MARKET COMMENT August 11, 2008 Yeah, I am one bad dude!

David Fry — Mon, 11 Aug 2008 22:18:34 +0000

Russia’s War on Democracy

Robert Amsterdam — Mon, 11 Aug 2008 21:14:07 +0000

Instead of spending the weekend watching the Olympics and enjoying some summer downtime with my family (like I assume many of this blog's readers were planning on doing), I found myself up to my neck in newspapers, on the phone, and glued to the web and TV as I watched with horror Russia's first invasion of a foreign sovereign state since the 1979 Soviet misadventure in Afghanistan. Anyone familiar with the lethal efficiency of the Russian military's recent domestic campaigns in Chechnya and elsewhere knew that things were going to get uglier and uglier, and that the disproportionate bombing campaigns would seek to achieve a "shock and awe" type effect, taking out many casualties. There's been a deluge of analysis out there, which hopefully we have robustly represented in earlier posts, and I only wish to add a few thoughts to these senseless and unnecessary events. Nearing the end of the day here in Europe, and having consumed about enough media on the subject to feel spin-dizzy, I am struck by several observations, mistaken assumptions in the media, and larger ideas about potential scenarios.

Troika thrives on connections

Jason Corcoran — Wed, 30 Jul 2008 13:54:00 +0000

Financial News

Jason Corcoran in Moscow
28 Jul 2008

The Russian investment bank benefits from privatisations

Andrei Sharonov, managing director and chairman of the board of directors at independent Russian investment bank Troika Dialog, knows more than most about the links between Russia’s public and private sectors. He served in the Government for a decade, including nine years as Deputy Minister of Economic Development and Trade.

Troika’s status as, in observers’ eyes, the Kremlin’s preferred investment bank has been cemented by its leading role in the recent sale of a 25% stake in state-controlled carmaker AvtoVAZ to France’s Renault, its mandates from the break-up of the electricity monopoly UES and its involvement in the privatisation programme of the state-owned rail giant RZD.

The deals have propelled Troika to the top of the Russian mergers and acquisitions league table for the first six months of the year, according to data provider Thomson Reuters.

Sharonov said: “Troika is in a good position, but there are some sectors in the Government where we have no mandate and it proves the market is competitive. There is no preference in general for the participation of investment banks in deals with the Government.”

Troika’s owner and chief executive, Ruben Vardanian, has long held links with several state-owned industries as well as members of the siloviki, the so-called securities services faction in the Kremlin. He is also a member of the board of state-owned arms agency Rosoboronexport and has close ties to its chairman, Sergei Chemezov.

An important Kremlin player tasked with reshaping the economy, Chemezov sits on the board of several Rosoboronexport-controlled enterprises such as Sukhoi Civil Aviation, which is leading the Kremlin-backed project to create a new passenger plane, and RusSpetsStal, a specialist steel producer with military applications.

Sharonov, who was appointed to the bank a year ago, retains seats on the boards of the utility UES and the airline Aeroflot.

Sharonov’s role is to act as a bridge between the bank and the state, and to attract investments into Russian companies in utilities, automotive, telecommunications and high technology sectors. He said: “We are glad to be involved in such projects providing a valuable link to the private sector. It’s a pro-market activity and we try to involve first-class investors and producers and to increase competitiveness and financial stability for the target.”

Having presided over the sale in February of a 25% blocking stake in AvtoVAZ worth $1.16bn (€740m) to Renault, Sharonov said Troika hoped to clinch a similar deal for truck manufacturer KamAZ. He said: “KamAZ could be developed as a truck manufacturer with one of the big boys from the west. We are looking for a strategic investor and there are talks with a number of interested parties.”

Both AvtoVAZ and KamAZ are large Soviet-era manufacturers located in the neighbouring Volga regions of Tatarstan and Samara. However, unlike AvtoVAZ, KamAZ is controlled by its management, which has built up a stake of over 50%, with the help of Troika. The Government owns about 30% and has said it may sell its stake through a London listing.

Troika, along with Morgan Stanley, is also one of the two co-ordinators of the upcoming $700m (€445m) initial public offering of TransContainer, the cargo subsidiary of RZD. Sharonov said Troika was also putting together a debt syndicate for RZD to address the company’s 500bn rouble (€13.6bn) investment programme.

Sharonov pointed to privatisations of electricity grid UES as a template for future transactions involving government enterprises. He said: “The example of UES has been a good template for future privatisations in so far as unbundling a monopoly and attracting private investors. The final hurdle will be price liberalisation, which will be painful for citizens and companies involved.”

Troika also has its eye on the Middle East and Asia. In March it set up a Kuwaiti-Russian business forum, and it intends to open a Dubai office next year. Troika is also setting up a $1bn infrastructure fund and seeking investment from Singapore sovereign wealth fund Temasek Holdings.

Troika Dialog UK, its London operation, has been boosted by a number of hires. Douglass Welch and Svetlana Lokhova have both joined from Citigroup as head of equity derivative sales and fixed-income sales associate, respectively. Andrew Keeley has relocated from Moscow as head of financial institutions research.

The privately owned bank, which has previously rejected overtures from western suitors, is playing catch-up with its Russian rival Renaissance. It has recruited the Kremlin’s PR advisers Ketchum to improve its communications and spent money on its inaugural Russia forum in January and an event at Davos, Switzerland.

Its staff in Russia has doubled to 1,500 staff over the past 18 months. Nick Harwood, former head of equities for central and eastern Europe, Middle East and Africa at Citigroup, will join Troika in mid-September to take up a role as deputy head of global markets.

Jacques Der Megreditchian, head of investment banking and global markets at Troika, said Harwood would be responsible for developing the bank’s product range, distribution for international clients and its move into new markets. He said: “We needed to create a deputy position because we are experiencing strong and rapid growth. We are opening in Kazakhstan, Singapore and we will set up in Dubai in 2008.”

Sheremetyevo flies into the 21st century

Jason Corcoran — Tue, 22 Jul 2008 17:51:00 +0000

Financial News

Jason Corcoran
21 July 2008

Letter from Moscow

Marathon queues, stony-faced immigration officials, lost baggage and creaking infrastructure may soon be a thing of the past at Moscow’s main international airport, Sheremetyevo.

The airport, which hasn’t altered much since the Soviet era, is sprucing itself up and trying to improve its image as it prepares for a possible flotation.

Travellers no longer have to face up to three hours snarled in traffic on the Leningradsky highway into the city following the introduction last month of a direct rail link.

State-run Russian railway operator RZD invested more than $200m in the project, an amount matched by private investors. The public-private partnership is thought to be the biggest of its kind in Russia.

The shuttle train into central Moscow will depart from the new business district know as Moscow City, the equivalent of London’s Canary Wharf.

In a recent note to investors, Peter Håkansson, chairman of Swedish fund manager East Capital, said: “It will feel like a real luxury to have an exact travel time, compared with the current situation. The journey to the airport can take anything from 30 minutes to three hours.”

Håkansson is not the only relieved Russia cheerleader. Domestic investment banks regularly bus thousands of investors into Moscow and will be pleased to see a welcome mat being laid out and the demise of the local taxi mafia.

Sheremetyevo, the home of state carrier Aeroflot, has been losing business for years to Moscow’s other airports, Domodedovo and Vnukovo, as airline travel has boomed. Domodedovo, in particular, has raised the bar. It is Russia’s largest airport in terms of both cargo and passenger traffic with 18.76 million passengers last year – up 22% from 2006.

The airport is efficient, light, airy, and has had a rail link for a couple of years. Subsidiary companies dedicated to commercial real estate and hotels have turned the airport into a thriving retail operation.

As foreign airlines are presented with more options in the capital’s airports, they are searching for those with the best infrastructure, in the hope of attracting vital passengers in a market with shrinking margins.

German carrier Lufthansa, which flies to nine destinations from Moscow, switched operations from Sheremetyevo to Domodedovo in April.

The new Terminal 3 at Sheremetyevo, which is expected to open next spring, will serve anchor tenant Aeroflot, and other members of the SkyTeam Alliance including Alitalia, Air France, Delta, KLM and Korean Air.

The passenger capacity is 12 million a year and it is expected to reach its maximum capacity in a year after opening.

Sheremetyevo is a state-controlled entity and management hopes the Government will take the risk and sanction the proposed initial public offering, or the sale of stake to a strategic investor.

The company is bringing on board three independent directors as part of a government initiative to overhaul corporate governance at state-owned companies. Ruben Vardanyan, chairman of investment bank Troika Dialog, Anna Belova, deputy general director of Siberian Coal and Energy Company and Vladimir Dmitriyev, chairman of state development bank Vneshekonombank, will join Sheremetyevo’s board.

Sheremetyevo general director Mikhail Vasilenko said last month the company could be ready to float by the end of the year, when investors might be able to buy at least 25% of the airport’s stock.

The airport estimates its current value at $1.5bn to $2bn. If the Government approves the move, Sheremetyevo will be the first publicly held airport in Russia.

Red Star enjoys happy third anniversary

Jason Corcoran — Wed, 09 Jul 2008 10:42:00 +0000

Business New Europe

Jason Corcoran in Moscow

July 9, 2008

A detsky sad, or kindergarten, is an unlikely neighbour for a Russian hedge fund, but James Fenkner is not fazed by a little background noise.

The founder and chief investment officer of Red Star Asset Management runs a friendly and informal investment shop on an unassuming residential street situated between Moscow's boulevard and garden ring roads. Red Star's team of seven have their heads buried in work as two-dozen two-year-olds run about shrieking seven floors below. It's also a family affair - Fenkner's sister Elizabeth plays a key role as the head of marketing.

The firm was set up in 2005 after Fenkner quit Troika Dialog where he had served seven years as head of research and initially as chief strategist. "The market was just coming out of deep crisis and there were just four funds in Moscow," recalls Fenkner. "I had gotten one of the best deals from Troika because that's where I met my wife. I left because brokerages are a young's man game."

The firm launched the Red Star Double Alpha Fund, a long/short relative-value vehicle targeting equities in Russia, Eastern Europe and the former Soviet Union. Its investment objective has an absolute return target of 18% to 22%, with volatility less than that of the region's equity markets.

The fund's main backer - Erste Bank, an Austrian retail bank with a network throughout Central and Eastern Europe - came on board after Red Star's US partners pulled out. Red Star's investors are mainly institutions and the firm has a few high net-worth clients.

Happy anniversary

May marked the third anniversary of the fund, which has registered a total return of 77%. The annualised return is 21% and volatility has been 12.6%. Fenkner is keen to make a marketing push for more clients now that funds under management have reached $100m and the firm has post the all-important three-year performance numbers under its belt. May also proved to be fund's best so far, with it's net asset value up 9% due mainly to the rally in Russia's energy stocks. Most of Russia's oil majors rose by over 20% due to record high oil prices and an expectation of a cut in taxation.

Fenkner feels the upswing to Russia's oil sector could be short-lived unless the modest $5bn tax relief amount being offered by the government is increased dramatically. "For the winning streak in oils to continue, the government must play for big money rather than tokens. Discussions with a number of analysts have convinced us that the ante must be upped to $20-25bn for oil production growth to pick up materially."

Red Star's preferred bets for greater taxation relief are oil field service providers and Surgutneftegaz, which has one of the worst production growth track records. Gazprom, the world's third largest company by market cap, is the fund's biggest holding.

With the restructuring of the electricity grid UES almost complete, Red Star is betting that hydro-electricity company RusHydro will become the new proxy for the sector. "RusHydro has been a drag on performance recently, but should be the biggest beneficiary from the break-up of UES on June 6," says Fenkner. " It should be the most profitable of the utilities and it currently trades at a 40% discount to its EM hydro peers."

Fenkner, who is 42. first arrived in Moscow over 13 years ago along a circuitous route taking in the Baltics and the Czech Republic. Back in the US, he had been a fixed income analyst at US mutual fund giant Fidelity after graduating with a degree in economics from California State University, Sacramento and a masters from Tufts University. His original plan in 1993 was to come to Lithuania for a year to work as a Soros Foundation lecturer in economics at Vilnius University. "I was teaching 18- to 20-year-olds at the time and they used to tell me that the Russians had two heads and ate their own children. The level of disinformation was enormous," recalls Fenkner.

The adventure continued when he took up an offer to help set up a brokerage in Prague call Atlantik Financial Markets. Then in 1995, Fenkner came to Moscow and had stints as head of research at AIOC Capital and Robert Flemings.

Bernie Sucher, a fellow American, lured him to work as chief strategist at Troika Dialog, which Sucher had co-founded. Under his direction, Troika's research focused on corporate governance and the opportunities and risks which any change in corporate governance provides to investors. "For a brokerage to be involved in corporate governance was rare. As the environment has matured, the interests of corporate clients has become a more important component of the brokerage business," says Fenkner.

Troika took up some unpopular causes, including backing former Yukos oil tycoon Mikhail Khodorkovsky, who ended up in prison after falling foul of the Kremlin. Fenkner believes the "heady days of corporate governance" are long over with the expulsion of shareholder activist Bill Browder of Hermitage Capital and because Russian corporates have made efforts to reform and evolved to more classical valuations.

Red Star's fund employs market-based activism in its investments. If the firm doesn't like a stock and it's expensive, they tend to short it instead. The fund uses a disciplined approach to invest long in securities that they believe to be fundamentally undervalued and to short securities which they believe to be fundamentally overvalued. He currently has seven short positions, including four in Russia.

Fenkner intends to continue at helm, because it is what he likes to do. He also has his own money invested in the fund, which, he says, "helps keep the mind focused" on performance.

www.businessneweurope.eu

Russia’s new revolution

Jason Corcoran — Thu, 03 Jul 2008 17:30:00 +0000

The Independent

Tuesday, 1 July 2008

Bankers were thought to be facing tough times after the credit crunch. But in Moscow, where business is booming, Brits are being attracted by soaring salaries. By Jason Corcoran and Nick Clark

It has been a very good year to be Russian. The national football team sparkled at Euro 2008, it secured the unrivalled musical accolade of winning the Eurovision Song Contest, and while the markets around the world disintegrate, its own economy has continued to boom.

Soaring consumer spending, oil past $140 a barrel, record numbers of mergers and acquisitions (M&A) and a high growth rate means the financial focus is firmly on Russia in 2008.

Investment bankers in the West are charging to Moscow to cash in on the rise of lucrative takeover deals, as London and New York have increasingly become graveyards for the bulge-bracket institutions. "Foreign bankers are pouring into Mos-cow, that's where the action is," one capital markets professional said yesterday.

The Russian investment banks Renaissance Capital and Troika Dialog have doubled staff in the past 18 months, often looking abroad for expertise, at a time when Western bulge-bracket institutions have been forced to slash headcount in the wake of the credit crunch.

The latest big-name banker to make for Red Square is Nick Harwood, the former head of equities for Central and Eastern Europe, the Middle East and Africa at Citigroup. Mr Harwood will take up a post as deputy head of global markets at Troika Dialog, a Russian investment bank known for its close ties to the Kremlin, in mid-September.

Banks in Moscow are known to offer bankers packages that are well above market rates in the West, yet Mr Harwood, who has worked for Citigroup around the world, said remuneration had not influenced his decision to move. He said: "I am leaving a global market to work in a regional market, but the role will have a much wider remit than equities. Moscow is a very dynamic city and Russia now has the energy of a major economic superpower."

Chris Harvey, the global head of banking at Deloitte, said: "Bankers from the UK are increasingly targeting the emerging markets, especially Russia. The economy is modernising, and while it is not necessarily making headlines in the West, there is a lot of mergers and acquisitions and project finance activity. The country is moving further into the 21st century, and barring micro-economic shocks should continue to grow."

Andrew Keeley, head of financial institutions research at Troika, has spent six years in Moscow, and divides his time between the Russian capital and London. "Bankers moving into Moscow from the West can expect to double their incomes because a major skills shortage still exists here. It's a different culture and it's very dynamic and there are other benefits too," said the 35-year-old from Kent.

This year's battle for banking talent in Moscow has been ignited by the state-controlled bank VTB's move into investment banking. VTB, which raised $8bn in a listing on the London Stock Exchange last year, poached at least 60 bankers from Deut-sche Bank in Moscow to staff its new operation. The German bank responded by hiring scores from American and European rivals, such as Unicredit, UBS and ING. VTB's chief executive, Andrei Kostin, said in March that the group will invest $500m (£250m) and hire 400 people in the next two years to expand its nascent investment banking business.

A source close to VTB said: "Some guys under 30 have arrived without much experience. It's ridiculous. They have doubled their income to $2m a year overnight." The top rainmakers in Russia can command about $8m on two-year deals, according to Jonathan Astbury, a managing director at the headhunter Sandton Group, which works with Renaissance, Troika and Goldman Sachs. He said: "This is a slight premium compared to New York and London, but the main benefit is they are taxed at just 13 per cent across the board, so they are significantly better off in real terms. Certainly, in career terms, we feel the continued malaise in Western markets, notably UK and North America, is making many bankers contemplate Eastern Europe, Middle East and Asia as the main viable career options in the short term."

Some are even commuting, according to senior bankers. One said: "Some guys coming from the West find the transition pretty hard." He said the two overnight flights from London on Sunday nights were increasingly filled with bankers getting in to start work in Moscow on Monday morning. Some of those were on the return flight on Friday afternoons, he said.

One senior UK banker, who has worked in London, New York and Hong Kong, moved to Mos-cow in 2006. He said: "The acceleration of people moving occurred in 2005, and now it is fairly common, including those that commute from London."

It is approaching a decade since the 1998 financial crisis, when the rouble collapsed, the fledgling stock market crashed and the government defaulted on its bonds. The resulting meltdown sent many expats fleeing to Moscow's Sheremetyevo Airport, but the banks have returned, tentatively at first, but emboldened by a fast-growing middle class and a more stable economic and political climate.

Marcus Svedberg, chief economist at East Capital, an asset manager that focuses on Eastern Europe, said: "Ten years ago, the country was nearly bankrupt; now the economy is dynamic and, despite what is happening elsewhere, the growth has been accelerating this year."

As an illustration of some of the advances in the Russian economy, which is based on its oil and gas reserves, Mr Svedberg pointed out that GDP in Russia had risen from $271bn in 1998 to $1.6 trillion this year. At the same time, debt has fallen from 50 per cent of GDP to 3 per cent. Inflation is down from 84 per cent to 10 per cent, while the interest rate has fallen from 150 per cent to 11 per cent.

The country now has an oil fund that has so far invested only in AAA-rated bonds. It is believed that when the mandate is renewed in October, the fund will have a much more aggressive buying strategy.

The American banker Nick Jordan was lured by Lehman Brothers last year from Deutsche for a reputed $10m a year to run its Moscow office. Mr Jordan is based in London but spends three weeks a month in Moscow. He said: "Over the last 15 years banks have moved from being local bond hedge funds to being well-rounded wholesale, commercial and retail banks. It's adding another piece to the puzzle."

Russia's capital markets have been largely insulated from the global credit crunch. M&A has filled the vacuum left by the fall-off in IPOs.

Richard Hainsworth, the founder and general director of RusRating, the bank rating agency, has seen many expats come and go since arriving in Moscow in 1982. Mr Hainsworth's advice to new arrivals in Moscow? "Take a holiday in December, when it gets dark, to Egypt. It makes a big difference. Try to have a lot of patience and count to 10 before reacting."

'It was a culture shock, but I anticipate being here for some time' - Bernard Abdelmalak, Renaissance Capital

From his office on the 46th floor of Moscow City's Naberezhnaya Tower, the banker Bernard Abdelmalak could be forgiven for thinking he was working in Canary Wharf.

The Russian capital's emerging business district, two miles west of the Kremlin on the banks of the Moscow river, is styled on Canary Wharf, although much of the vast development is still a building site.

Mr Abdelmalak, who left his job at Citigroup in London, his home town, a year ago, works for the Russian emerging markets bank Renaissance Capital, which recently shifted most of its workforce to the Presensky district of Moscow.

"Moving here has been a culture shock, and I miss my family and friends, but there is plenty of upside, such as this view and working for a dynamic investment bank in such a fascinating and fast-paced city," he said.

Remuneration is a large part of the upside for bankers trading places from London to Moscow. Mr Abdelmalak, 31, has benefited from a generous increase in salary coupled with a reduced tax rate of 13 per cent.

Renaissance is among a handful of financial institutions, such as Lehman Brothers, Citibank, Standard Bank, KPMG and VTB, that have recently opened offices. Mr Abdelmalak lives in the centre of the city and misses the hubbub of working near the busy commercial thoroughfare of Tverskaya, the city's main artery into Red Square. He said: "There are no shops, no restaurants, no bars, just one Starbucks and two industrial-size canteens, but that's what Canary Wharf was once like."

His position as head of equity product control involves looking after the bank's trades in Africa, as well as its bonds and repos operations. He regularly travels to Kiev, Lagos and Nairobi. Soon that is likely to include Amaty in Kazakhstan.

He is routinely working till 9pm on Mondays and Tuesdays before client and colleague socialising begins mid-week. He takes Russian language lessons two or three times a week. "Life is very different to London. I am out of my comfort zone."

Mr Abdelmalak is taking a long term-view. "If the market here holds as well as it has so far in the global credit crisis, I anticipate being here for some time yet," he said.

Jason Corcoran

Fund launched to track oligarch assets

Jason Corcoran — Thu, 03 Jul 2008 17:24:00 +0000

Wealth Bulletin

July 1 2008 - By Jason Corcoran

Ukrainian investment firm Concorde Asset Management is aiming to attract $120m to a new fund investing only in companies controlled by oligarchs who wield significant influence on local business and politics.

The Olihagarch or "Oliharkh" fund, will buy shares of large financial and industrial groups owned by wealthy Ukrainian businessmen who have growing influence in the country's political sphere.

The fund will track the market value of publicly traded assets falling within the scope of Ukrainian financial-industrial groups, which are owned by a few of the country's seriously rich.

The idea could be a winner. In the late 1990s, Russian oligarch companies significantly outperformed the indices. However, following the election of Vladimir Putin as president in 2000 this trend ended when many oligarchs fled the country and were jailed.

Ukraine's oligarchs are in a better position than their Russian forebears: while Russia's oligarchs were close to government, many of their Ukrainian counterparts are actually in government.

Local billionaire Rinat Akhmetov was in 127th place in the Forbes ranking of the richest people on the planet. And according to the ratings of the Polish magazine Wprost, three Ukrainian billionaires are among the 20 richest people in Eastern Europe.

Concorde is a subsidiary of Concorde Capital, one of the two leading domestic brokers operating in Ukraine.

Troika hires Citigroup equities head

Jason Corcoran — Thu, 03 Jul 2008 17:22:00 +0000

Financial News

Jason Corcoran in Moscow

30 June 2008

Citigroup’s head of equities for central and eastern Europe, the Middle East and Africa is quitting to join Russia’s Troika Dialog in the latest defection from the investment bank.

Nick Harwood led Citigroup’s move into Turkey with the acquisition last year of local broker Opus Menkul Degerler and helped the bank set up offices this year in Kenya and Nigeria.

Harwood’s exit comes after the the bank’s co-head of global credit markets, Mark Watson, left to “pursue new opportunities”, and the departure to UBS of Dmitry Vinogradov, head of research, strategy and banking in Moscow.

It emerged last month that former Russia country head Stuart Harley quit the bank in February, while co-head of equity research Mikhail Seleznev and equity sales director Sergei Suverov left to join Deutsche Bank.

London-based Harwood, who is on gardening leave, arrives in Moscow in mid-September to take up a role as deputy head of global markets at Troika Dialog. He will be responsible for developing the bank’s product range, distribution for international clients and its move into new markets.

Citigroup is understood to be looking at internal candidates to replace Harwood.

www.efinancialnews.com

Russian billionaire behind wealth management deal

Jason Corcoran — Thu, 03 Jul 2008 17:20:00 +0000

Wealth Bulletin

27 June 2008 - By Jason Corcoran

Russian billionaire George Piskov and his partners have sold a 80% stake in Uniastrum Bank for $576mn (€371m) to the Bank of Cyprus.

Piskov (pictured below), an aviation engineer- turned businessmen, set up the Uniastrum in 1994 with two friends Uniastrum president Gagik Zakaryan and Oleg Belousov.

The fast growing bank, which now 220 branches across Russia, has focused on retail banking to Russia SMEs and the money transfers business. It has also branched out into the international wealth management business and set up Uniastrum Capital in London in 2001.

The owners decided to split its money transfer business Unistream off after the volumes jumped from $260m in 2004 to $750m in 2005. It was sold to Aurora Russia, a private equity firm, last year

The bank made the headlines in January 2006 when it announced the appointment of the UK's former Chancellor of the Exchequer Norman Lamont as chairman of its supervisory board.

It previously flirted with the idea of floating 25% of its shares in a dual listing in London and Moscow before opting for the strategic investor route.

Bank of Cyprus said the deal represents an attractive acquisition multiple of 3.1 times the bank's price to book value, taking into account a $50m capital raising after closing

The remaining 20% stake will remain in the hands of Uniastrum's two primary stakeholders Piskov and Zakaryan with a three-year buyout option.

Piskov and Zakaryan will carry on as chairman and president of the bank.

A research note from Renaissance Capital said: "We view the deal as supportive for Russian banking stock, since it shows an ongoing healthy demand from international banks for assets in the space and that attractive multiples are still being paid."

Merrill to open wealth units in Moscow, Istanbul

Jason Corcoran — Thu, 03 Jul 2008 17:17:00 +0000

Wealth Bulletin

24 June 2008 - By Jason Corcoran

Merrill Lynch wealth management unit is expanding its business by opening new offices in Russia and Turkey and expanding teams in Greece and other regions of emerging Europe.

Jean-Marie Deluermoz, director of emerging European markets, EMEA Wealth Management, at Merrill Lynch, said the group had given him a substantial budget to expand the business over the next five years.

Speaking in Moscow at the launch of the Capgemini Merrill Lynch 2008 Wealth Report, he told Wealth Bulletin: "We have a big recruitment budget for the region. Emerging Europe - Russia, the former Soviet Union states, Turkey and Greece - are attracting strong growth rates for wealth management."

A Moscow office to serve Russian clients offshore is expected to open in the third quarter, as is a new office in Istanbul. Merrill is also recruiting new teams for Greece and other countries, which were not disclosed.

Deluermoz, who set up Credit Suisse's representative office in Moscow in 2003, will take charge of the Russian operation from London.

He said Russian high net worth clients were starting to look beyond cash deposits and real estate investment to more sophisticated products such as hedge funds.

Deluermoz said the bank had decided not to go down the route of offering onshore banking in Moscow like its rivals UBS and Credit Suisse.

"It takes one year to get authorisation from the market regulator and another two years for a retail banking license, which you need to offer wealth management services," he added.

An Auto Market Where Gas Prices Are Helping Sales

Graham Summers — Thu, 12 Jun 2008 12:42:47 +0000

Jun 12th, 2008: High oil prices are driving a boom, not a bust, for auto manufacturers in Russia.

Resistance is (for now) Support

Trader Mark — Mon, 05 May 2008 16:13:00 +0000

After clearing the bogey at S&P 1405 at last in the previous week, the index has now pulled back to that level and for now bounced off it... hence old "resistance" now becomes new "support". It will be interesting to see if this holds but I expect...

Petrobas Stock on the Way Up

Edward Hugh — Fri, 02 May 2008 06:39:00 +0000

The biggest oil discovery in the Western hemisphere in three decades and speculation about the existence of an even larger deposit has turned Petroleo Brasileiro SA into the world's most expensive energy producer, at least in terms of its share price to profits ratio. Petrobras shares currently trade at 17.2 times profits after rallying 87 percent over the last year. (By way of comparison Petrobras's price-earnings ratio was 8.77 a year ago and under 5 back in June 2004).This makes Petrobas shares effectively twice as expensive as Russia's Lukoil and or the netherland's Royal Dutch Shell, and 50 percent more expensive than Exxon Mobil - which only this week announced that total output was down 10% in the first three months of 2008 when compared with a year earlier - as investors focus on the Rio de Janeiro-based company's oil finds rather than its falling profits. Lukoil trades at 7.77 while Royal Dutch Shell is at 7.6 times earnings. Irvine, Exxon's PE ratio is 11.60. The remainder of the world's 10 largest oil producers are also cheaper than Petrobras at this point.

Exxon’s overall oil and gas production fell 5.6 per cent from the year-earlier quarter. Production in Africa, a key new area of investment, fell 20 per cent as high oil prices and contract stipulations forced it to hand over more of its production to host country governments. Venezuela’s nationalisation of its oil fields also hurt the group’s volumes, as did declines at Canadian gas fields. Unlike Royal Dutch Shell, which is stressing its research in second generation biofuels, and is a leader in making natural gas into transport fuels, Exxon has long argued that traditional alternatives, such as wind power, have proved uneconomic. But it says it is researching future fuels that it is less ready to talk about publicly. The figures are likely to increase pressure from investors for Exxon to raise dividends. It devoted $8bn to buying back its own shares and $1.9bn to dividends while adding another $6.9bn to its now $40.9bn cash pile.

The Brazilian government's controlling stake in Petrobras may add to the stock's attraction on speculation the company will get favorable treatment in exploiting oil. President Luiz Inacio Lula da Silva's administration pulled 41 exploration licenses from an auction after Petrobras found the Tupi oil field Nov. 8, a discovery that caused the stock to jump 14 percent, the biggest rise in nine years. Tupi, 155 miles (250 kilometers) off Brazil's coast, may have 8 billion barrels of recoverable oil.

Petrobras shares rose another 5.6 percent on April 14 after the head of Brazil's oil agency said the offshore Carioca prospect may hold the equivalent of 33 billion barrels of crude, large enough to be the world's third-biggest field. Chief Executive Officer Jose Sergio Gabrielli said later Petrobras is still exploring to determine Caricoa's size.

The strong performance by Petrobas helped lead Brazil's Bovespa to a 6.3 percent jump on April 30, making it the world's best-performing equity index this year among the 20 biggest markets, after Standard & Poor's assigned the country an investment grade credit rating. Brazilian markets were closed yesterday for a holiday.

Petrobras, now the world's ninth-biggest company, with a market value of $248.3 billion, is still half the size of Exxon, the largest oil producer. However Petrobas's valuation surpassed PetroChina's last November - after shares of the Beijing-based oil company posted their biggest monthly retreat ever.

Fourth-quarter profit at Petrobras declined about 3 percent as costs increased faster than sales. The company produced an average 2.34 million barrels of oil, natural gas and natural-gas liquids a day in March, down from 2.35 million barrels a day the month before.

However Brazil's biggest company by market value looks less expensive when viewed relative to the oil it owns. Petrobras trades for the equivalent of 34.91 reais (or $20.58) per barrel of proven reserves. That's cheaper than Exxon's $22.19 a barrel and Royal Dutch Shell's $23.80 per barrel of oil equivalent in reserve. Under this measure, Petrobras is still more expensive than BP and Lukoil, which fetch $14.75 and $4.71 a barrel.

It should not be forgotten however that pumping oil from the most recent Brazilian discoveries, parts of which are 32,000 feet (9,800 meters) below the ocean's surface, will require boring almost twice as far down as the world's deepest offshore well. So there are tachnological issues to take into account here. But still, once these are resolved (assuming they are) Petrobas seems to have its hands on rather a lot of oil at just the time when global demand seems set to rise and rise.

Chile and the OECD

Edward Hugh — Wed, 09 Jan 2008 20:55:00 +0000

Chile has a thriving and well-managed economy although income levels are only 40 per cent of the western average, according to a report from the Organisation for Economic Co-operation and Development that is likely to reinforce Chile’s case for joining the 30-nation group.

More efficient government spending on education and social programmes, success in tackling the "black" economy and getting more women and young people into work will be crucial to maintaining Chile's strong economic growth, according to a new OECD report.

The OECD Economic Survey also says public finances are robust, growth is strong, and inflation, despite having risen recently, remains low. But labour productivity compares poorly with many OECD countries. Boosting productivity will require more business innovation and improving the education levels of the workforce.

Chile's healthy public finances are allowing increased spending on education, healthcare and other social programmes. Although educational attainment levels of Chilean pupils compare well with other Latin American countries, they are generally lower than in OECD countries. The report argues that extra money alone will not raise educational standards or enrolment and graduation rates. It calls for more focus on the quality of education through, for instance, greater attention to students from disadvantaged backgrounds and additional training programmes for teachers and school managers.

Improving education and skills is also key to discouraging people from working in the informal or "black" economy. About 20% of Chileans aged over 15 and working at least 20 hours a week did not have a formal labour contract in 2003, the latest year for which figures are available, says the report. Streamlining business registration and tax procedures would reduce the number of enterprises operating informally while the labour code could made more flexible. At the same time, social security schemes should be enhanced to encourage firms and their workers to be part of the formal economy.

The percentage of women aged over 15 in the labour force has risen over recent years but remains relatively low at around 42%. Male participation in the workforce is about 73%. Increasing the number of women in paid employment would support Chile's long-term economic growth and help reduce poverty, the report says. It adds that further incentives could be provided by more flexibility in working time arrangements, adapting social security provisions and increasing publicly-funded child-care, especially for the poor. Policies to raise educational attainment would also help as participation is higher among better-educated women.

OECD countries have launched a drive to engage more closely with emerging economies worldwide. Chile is one of several countries, along with Estonia, Israel, Russia and Slovenia, which have been invited to open membership negotiations. OECD has also launched a process of "enhanced engagement" with major emerging economies including Brazil, China, India, Indonesia and South Africa, with a view to strengthening mutual links.

The OECD in May invited Chile to begin negotiations on becoming a member, a process expected to take at least two years and separate from Monday’s report.

The OECD report praised Chile’s strong economic growth – expected to be about 6 per cent next year – prudent fiscal policies and low, albeit rising, inflation. It also approved of the way it has been saving windfall copper revenue generated by record prices.

It highlighted important reforms to the pension system that the government of Michelle Bachelet, the president, has undertaken.

The report noted that a fifth of people over 15 who work more than 20 hours a week are in the informal economy. It was vital to change that to boost productivity and thus keep Chile growing sustainably.

Chile should also make labour rules more flexible and provide access to affordable child care to boost the number of women in the workforce from about 42 per cent now.

Recent Global Stock Market Performance

Prieur du Plessis — Thu, 06 Sep 2007 15:48:23 +0000

Global stock markets regained much of their credit squeeze losses during the second half of August 2007 to end the month only in slightly negative territory. The MSCI World Index was down -0.3% and the MSCI Emerging Markets Index lost -2.2%, but ten of the 54 indices in the accompanying table still managed to end [...]

What The Big Boys Say About the Economy

William Trent — Thu, 23 Aug 2007 00:39:24 +0000

I decided to take a look at what some of the largest companies by revenue are saying about their business. All looks well at General Electric (GE) – Annual Report. The second quarter orders were a record, up 32%; we grew our backlog. We’ve got very strong global demand, up 21% in revenue. We continue our focus [...]

Listening to Opinions on Market Turmoil

Richard Shaw — Tue, 21 Aug 2007 01:19:05 +0000

Sometimes it’s better to listen than to talk. That’s where we are today concerning the current market turmoil. The following are excerpts from the PIMCO montly letter and a piece in Fortune Magazine called “Crisis Counsel” . Bill Gross (Chairman, PIMCO) “[August newsletter] No longer will double-digit LBO returns be supported by cheap financing and shameless covenants. [...]

DOW Wants in the Russian Market

Todd Sullivan — Mon, 06 Aug 2007 17:57:13 +0000

Dow Chemical (DOW) is looking for a Russian partner to construct a petrochemical plant in Russia. Gazprom has been indicated as a possible partner in the plant construction. DOW representatives note that Russia currently produces less ethylene than any of Dow Chemical’s plants around the world. Last year Dow’s turnover in Russia and CIS countries totaled [...]

Global Market Performance Roundup

Prieur du Plessis — Fri, 03 Aug 2007 16:44:31 +0000

What you see may not be what you get, especially when analyzing historical stock market performance. One would be excused for thinking that global stock markets were on an uninterrupted upward path when considering their good gains in US dollar for the three months ended July 31, 2007. But that is only part of the [...]

Fly, Don’t Buy – Why Airlines Are a Mistake

Vitaliy Katsenelson — Fri, 27 Jul 2007 15:59:42 +0000

If I’ve learned anything over the years, it’s that people don’t learn. Recently, I talked to my cousin who is an executive with a Russian airline company. In our discussion he mentioned that his company just received semi-unsecured loans (all planes are leased so they are not used as a collateral) from western banks at [...]