Stock Market News & Stocks to Watch from StraightStocks » Moscow

How to Earn Putin Points and Survive in Russian Business

Robert Amsterdam — Wed, 25 Nov 2009 22:28:21 +0000

I was taken aback the other day to open up the Moscow Times website and find an glowing opinion article written by Brian Zimbler, a Moscow based lawyer of the firm Dewey & LeBoeuf. The article, which heaped praise upon...

VIP Falls Behind Expectations – Analyst Blog

Zacks Market Commentaries — Wed, 25 Nov 2009 22:00:13 +0000

VimpelCom (VIP) reported third-quarter 2009 earnings of 42 cents per ADS (based on an average exchange rate of 31.26 RUR/US$) that narrowly missed the Zacks Consensus Estimate of 44 cents. However, the result beat the year-ago earnings per ADS of 27 cents.

The second-largest Russian telecom carrier reported quarterly net income of RUR13.5 billion (US$432 million), more than double the net income of RUR6.5 billion (US$208 million) reported in the year-ago quarter. This significant year-over-year growth is largely attributable to foreign exchange gains from a strong Russian ruble versus the US dollar.

Operating revenue increased 3.5% year over year to RUR71.3 billion (US$2.3 billion) as growth across Russia, Kazakhstan, Uzbekistan and Tajikistan was partly offset by declines in Ukraine and Armenia. Revenue from the wireless operation was RUR60.7 billion (US$1.9 billion) while the fixed-line business generated revenue of RUR15.1 billion (US$483 million).

Reported OIBDA of RUR36 billion (US$1.2 billion) reflects a year-over-year growth of 7%, yielding an OIBDA margin of 50.4%. The annualized growth reflects the company’s ability to reduce costs amid the volatile economic environment. VimpelCom is pursuing various strategies to maximize cash flow through several cost-control measures.

The company’s total active cellular subscriber base grew by roughly 7.6 million year over year and by 1.7 million sequentially to 65.4 million. Its broadband subscriber base increased 11% sequentially to approximately 1.9 million.

On a geographic basis, revenue from Russia increased 4.1% year over year to RUR61.2 billion (US$1.9 billion), representing roughly 86% of the company’s total sales. Mobile subscriber base in Russia grew 13.2% year over year to 51 million. VimpelCom added 174,000 broadband subscribers during the quarter, bringing the total customer base to 1.83 million. The results were supported by a resurgent Russian economy.

Consolidated revenue from the CIS markets grew 3.9% year over year to RUR11.1 billion (US$355 million). Revenue from Kazakhstan (the largest CIS market) registered RUR5.4 billion (US$173 million), up 11.9% year over year. However, sales declined year over year in other key markets such as Ukraine (down 22.3%) and Armenia (down 3.4%).

During the quarter, VimpelCom spent RUR3.8 billion (US$122 million) in capital expenditures (CAPEX). The company has revised its CAPEX guidance reflecting a stronger ruble versus the dollar. VimpelCom expects CAPEX to be in the range of 10%-12% of its 2009 annual sales. The company plans to lift capital spending by at least 50% in 2010 to support 3G network expansion. VimpelCom’s 3G services currently cover all regions of Russia.

VimpelCom repaid debt worth US$690 million during the third quarter. The company successfully reduced its net debt to US$5.5 billion at the end of the quarter from $6.3 billion registered in the previous quarter.

In October 2009, the company’s two major shareholders Telenor and Altimo announced plans to merge their holdings in VimpelCom and Ukranian mobile operator Kyivstar to create a jointly owned telecom operator.

VimpelCom remains the second-largest wireless operator in Russia with over a 25% market share. Nevertheless, the company has a higher projected growth rate than its Russian peer Mobile Telesystems (MBT) as it continues to demonstrate the ability to succeed in emerging markets on the strength of sustained subscriber growth.

Besides maintaining its strong market position in the rapidly maturing Moscow metropolitan area, VimpleCom has successfully expanded into incipient Asian markets such as Vietnam and Cambodia. The company completed the commercial launch of its cellular operation in Cambodia in May 2009 under the Beeline brand. This was followed by the launch of wireless operation in Vietnam in July 2009. Moreover, VimpleCom recently signed an agreement to enter the Laos mobile market.

VimpelCom plans to cover more than two-third of Cambodia’s population by the end of 2009 and reach over 40 provinces and 41 million people in Vietnam by the end of January 2010. The relatively lower mobile penetration in these new Asian markets offers attractive growth opportunities for the company.
Read the full analyst report on "VIP"
Read the full analyst report on "MBT"
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Is Russia Experiencing a Change of Heart on Iran?

Robert Amsterdam — Wed, 25 Nov 2009 19:13:07 +0000

Writing at the New Republic, Michael Crowley scrounges deep down in the evidence bin for an argument on Russia's Iran policy:In recent weeks, Barack Obama's foreign policy has been derided by critics who say he has almost nothing to show for his first 10...

The Russia Repetition Syndrome

Robert Amsterdam — Tue, 24 Nov 2009 21:01:53 +0000

Say what you will about the Putin-Medvedev diarchy, but there's no doubting the success they have had in keeping the media running circles around their own script. In fact, reading this CSM editorial (and many others), I get that familiar...

Energy Blast – Nov 24, 2009

Robert Amsterdam — Tue, 24 Nov 2009 12:00:34 +0000

Turkey's highest court has reversed the decision to have Atomstroyexport build its first nuclear power plant, due to allegations of unfairly high prices issued by the Russian company, and concerns about energy dependency. Russia will give Belarus a 30-40% discount...

Russia’s Consumers Get “Carried” Onwards And Upwards

Edward Hugh — Sun, 22 Nov 2009 16:24:00 +0000

blockquote“Cutting rates by 50 basis points here and there is not going really diminish the appeal of the ruble,” said Manik Narain, an emerging markets strategist at Standard Chartered Bank Plc in London. “In terms of nominal interest rates Russia (at 9% as of 24 November) is still offering the highest yields in the emerging market space and in an environment where oil prices are remaining relatively well supported we think that the ruble will continue to be seen as an attractive way to position for global recovery,” /blockquotepbr /The world's central banks are having a hard time of it these days, having just gotten through the worst banking and financial crisis in living memory they now face a growing dilema between continuing to give support to the developed economies (which are yet to recover from those early hammer blows) and the danger of creating fresh global asset price bubbles in emerging economies, asset bubbles which could easily be being fuelled by low US interest rates and a weak dollar. The latest warning in this respect comes not from Nouriel Roubini (or even from me, a href="http://fistfulofeuros.net/afoe/economics-country-briefings/the-dollar-as-a-funding-currency/"but see this post/a, and a href="http://www.forexblog.org/2009/11/interview-with-edward-hugh-the-dollars-demise-is-vastly-overstated.html"this recent interview I gave on Forex Blog/a), rather it emmanates from Germany’s new finance minister, Wolfgang Schäuble. His comments - which were a href="http://www.ft.com/cms/s/0/4ec41a1a-d616-11de-b80f-00144feabdc0.html"cited in last Saturday's Financial Times/a - highlight official concern in Europe that the exceptional steps taken by central banks and governments to combat the crisis carry with them a series of undesireable side effects.br /br /Such openly expressed concerns only add further weight to a href="http://www.ft.com/cms/s/0/85f1fac2-d1dc-11de-a0f0-00144feabdc0.html"recent statements made in China/a, where only a week ago the banking regulator Liu Mingkao explicitly criticised the US Federal Reserve for indirectly fuelling the “dollar carry-trade” – a process whereby investors borrow dollars at ultra-low interest rates in the United States and the invest them in higher-yielding assets abroad.br /br /Wolfgang Schäuble went even further, saying it would be “naive” to assume the next asset price bubble would look just like the last one. “More likely today is a scenario in which excess liquidity globally creates a new [sort of] asset market bubble.” he said, and the fact “ that low interest rate currencies such as the US dollar increasingly being used as a basis for currency carry trades should give pause for thought. If there was a sudden reversal in this business, markets would be threatened with enormous turbulence, including in foreign exchange markets.”br /br /As I argued in my last post on the carry trade, the danger of a short term sudden reversal may be being overstated at this point, since exit from emergency life support will be at best slow and measured in the United States, while ample funding will continue to remain available in Japan, where the central bank a href="http://www.ft.com/cms/s/0/c3a3be3e-d608-11de-b80f-00144feabdc0.html"has now formally recognised that the economy is once more back in deflation/a (officially it exited in 2006, and did the Bank did manage to summon up half a percentage points worth of interest rate rise before falling back again, but in reality, if we strip out the oil price impact, the sad truth is that Japan never really left deflation).br /br /However, regardless of whether or not we are running the danger of having an overly rapid unwind effect, untold damage is in fact being done, with the structural distortions being produced by the massive “wall of liquidity” which is currently sweeping the planet being evident enough, showing up as it is in some unexpected places, like Russia for example.br /br /br /strongRuble Once More On The Rise/strongbr /br /On the face of it the idea that investors who were rushing for the Russian door following the Roki tunnel incursion back in August 2008 may now be rushing back in again may seem hard to believe, particularly given the serious economic recession which followed, and in reality it isn’t quite like this, but what is clear is that a steady and significant flow of funds is now most definitely heading in Russia’s direction - even if the immediate objective is not to increase Russia most definitely needs, namely capital investment. A brief glance at the ruble vs US dollar charts shows immediately what has been happening. After hitting a low of $31.39 on September 2 the ruble has been steadily rising, and was at $28.65 on November 11, since which time it has been hovering, as investors vacilate waiting to see where policy and the currency go from here./ppa href="http://1.bp.blogspot.com/_ngczZkrw340/Sw4pa3BFLiI/AAAAAAAAPow/4p8N8w7-NNQ/s1600/rouble+2.png" /ppimg style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 240px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5408305743940365858" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sw4pa3BFLiI/AAAAAAAAPow/4p8N8w7-NNQ/s400/rouble+2.png" //a At the same time, if we look at movements in the ruble-USD over a longer period of time (2 years in the chart below) it is plain the the ruble hit bottom on 4 February 2009 at $36.22 after falling steadily from 17 July 2009 when it touched $23.25./pp /ppbr //ppa href="http://3.bp.blogspot.com/_ngczZkrw340/Sw4pXI2mHVI/AAAAAAAAPoo/UTsQ29_bkVA/s1600/rouble+one.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 244px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5408305680008748370" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Sw4pXI2mHVI/AAAAAAAAPoo/UTsQ29_bkVA/s400/rouble+one.png" //abr /br /br /br /br /In fact, as I say, while it is clear that Russia is on the receiving end of a steady inflow of funds, it is far from clear that these funds are of the kind she most needs at this point. Much of the money has been going into stocks, and Russian equity funds drew record amounts at the end of October, according to data provided by EPFR Global. And Bllomberg data show that the ruble has been the second-best performer among emerging market currencies after the Chilean peso over the past three months, gaining 8.7 percent in the period. And even foreign currency purchases from the central bank and lowering interest rates systematically to a record low (in Russian terms) has not worked. Indeed Russi'a foreign currency reserves have now risen to $441.7 billion (as of Nov. 13) compared with the low of $376.1 billion reached on March 13. Indeed the Micex Stock Index of Russia’s 30 most liquid stocks has gained 116 percent this year, making the Index the world’s best- performing benchmark equity measure since January (in local currency terms) according to Bloomberg data. br /br /In comparison Russia’s foreign direct investment plummeted an annual by 48.1 percent, the most on record, to just $10 billion in the first nine months of the year, while overall foreign investment, including credits and flows into securities markets, was $54.7 billion, down 27.8 percent when compared with the same period a year earlier,according to Federal Statistics Service data. Other foreign investments, including loans from foreign banks and Russian companies’ foreign divisions, were down 20.9 percent in the period to $43.7 billion. The consequence of all this is that the decline in investment activity has been - as can be seen in the GDP growth components chart below - perhaps the greatest single drag on the domestic Russian economy over the past twelve months.br /br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/Swq58CA-BvI/AAAAAAAAPnI/A-avWTMjlnI/s1600/russia+growth+components.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 297px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5407338743595927282" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Swq58CA-BvI/AAAAAAAAPnI/A-avWTMjlnI/s400/russia+growth+components.png" //abr /br /But this overall impression no longer gives us a precise up-to-date picture picture because, in a reversal of the previous pattern of capital flight Russia has, significant capital flows have, since mid-September, been making their way towards Russia, in the process enabling the central bank to once more rebuild up its badly shaken currency reserves. These have fluctuated from a high of $582 billion in August 2008 to a low of $384 billion in Feb – April 2009, and now stand at some $413 billion as of September. What is happening is that pressure to repay those outstanding debts which external lenders are unwilling to rollover means the aggregate capital flow data to some extent masque a change in the structure of Russian external debt. In the opinion of Guillaume Tresca, a Paris-based emerging market strategist with Credit Agricole’s Caylon Unit, the Russian authorities are now under severe pressure to accept the inevitability of short term ruble appreciation and even though they “will try to do what they can to smooth the process, it’s very hard for them to go against the flow” since current “capital inflows are massive.”br /br /Indeed a consensus seems to be now emerging that Russia’s central bank may find itself having to reluctantly accept a stronger ruble next year as rising commodity prices prove too powerful a force for policy makers to counter and as consumer demand plays a bigger role in the bank’s decisions. Representatives of the Russian administration have repeatedly asserted that they will cap the ruble’s advance with Vladimir Putin stating his government won’t allow excessive appreciation in a bid to give some support to struggling exporters. But the Canute like task of driving back the ocean is hardly an easy one, and the IMF recently warned that efforts to fight the ruble’s advance may prove “unproductive.”br /br /The problem is, in the short term at least, letting the rouble rise has its attractions for a Russian administration faced with simmering popular frustration with their inability to get the ongoing contraction fully under control. A rising ruble means slower inflation and more spending power for domestic consumers, who have yet to get over the record 10.9 percent economic contraction which hit them in the second quarter. Given that the eight interest rate cuts introduced by the central bank since April have manifestly failed to unlock the credit flow to consumers as banks hold back their lending on concern borrowers can’t repay their debt (see chart below) a rising exchange rate certainly seems to be worth a second look as a way forward, since while a higher exchange rate coupled with near double digit inflation may cripple manufacturing competitiveness, it does transfer incomes directly into people’s pockets, something hard pressed politicians might see as quite beneficial.br /br /a href="http://3.bp.blogspot.com/_ngczZkrw340/Swv02_RS5BI/AAAAAAAAPnQ/EGbBRnSLgsk/s1600/russia+credit+growth.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 327px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5407685003122500626" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Swv02_RS5BI/AAAAAAAAPnQ/EGbBRnSLgsk/s400/russia+credit+growth.png" //a Lending is still - as can be seen in the above chart prepared by the World Bank for its latest report - a problem, and corporate (or non-financial corporation lending) fell by 0.7 percent in September from August continuing the ongoing decline. Lending to households dropped 1.1 percent making the eighth consecutive monthly decline, with year on year levels now in negative territory, while non performing retail loans rose, climbing to 6.4 percent from 6.2 percent.br /br /And the World Bank expect the many bank balance sheets will continue deteriorating as the share of non-performing loans increases. “In the environment of increasing credit risks, lending activities by the banks have remained limited despite improving liquidity conditions in the economy and continuing monetary loosening.” Bad debts in the banking industry may reach an average of 10 percent by the end of the year according to the Bank.br /br /br /And when we look at ruble realities, as the IMF point out, efforts to stem the ongoing rise with intervention are far from being able to give the desired result. Bank Rossii bought a net $15.2 billion and 485 million euros in October, their largest foreign currency purchases since May, and went on to buy $6 billion during the first 17 days of November according to press reports citing central bank chairman, Sergey Ignatiev. Yet last week the Russian the ruble ended 0.1 percent higher at 35.0632 against the central bank’s target currency basket, its strongest level since December 23 2008. The ruble appreciated 3.4 percent in October against the dollar (for its second consecutive monthly gain) and has risen more than 1 percent so far in November. Thus the central bank has now moved on to use monetary policy to try and stem the rise, and said on October 29 that it would also use interest rates in an attempt to reduce the “attractiveness of short-term investments in Russian assets and stop the accumulation of risk”.br /br /The recent rise follows ruble a 35 percent slump against the dollar between August last year and January, raising the cost of imports (which make up about 49 percent of the consumer goods sold in Russia) and, in theory, making Russia's domestic industry somewhat more competitive externally. However, without a sound institutional infrastructure, and a coherent monetary policy, short term devaluation gains can easily be turned into medium term inflation, thus defeating the purpose of corrective price devaluation.br //pp/pbr /br /br /pThe problem is not in fact of recent making, and is a product of a steady and systematic long term mismanagement of Russia's monetary policy which has now created a veritable Procrustean bed of problems for Russia's economy and society. Failure to address the underlying inflation problem between 2005 and 2008 meant that large structural distrortions were accumulated in the economy, including a massive problem of commodity export dependence, a problem which effectively turned the country into a veritable disaster waiting to happen if ever there should be a protracted lull in the secular rise in energy prices. That lull has most definitely now arrived, and while Russia's future depends in the short term - on energy prices, it is far from clear what the future holds for the energy prices themselves. /pbr /pa href="http://3.bp.blogspot.com/_ngczZkrw340/Swv5min3eZI/AAAAAAAAPnY/rqDWKGy7ABg/s1600/world+bank+oil.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 283px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5407690218112776594" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Swv5min3eZI/AAAAAAAAPnY/rqDWKGy7ABg/s400/world+bank+oil.png" //abr /br /Weak global demand for oil has led to a sharp rise in excess capacity and OPEC's spare capacity has risen to levels not seen since 2002, when prices averaged USD25/barrel with OPEC’s pricing power staying very low. Up to now oil prices have remained in the USD70/barrel range, supported by OPEC output restraint and its stated desire to have prices reach what it calls "a comfortable level" - ie near USD75/barrel - as well as by expectations of rising demand. At its September 2009 meeting, OPEC left its production quotas unchanged but indicated it would take rapid action if prices dropped sharply. OPEC production, however, continues to edge higher, with compliance to its combined cuts of 4.2 million barrels per day falling to 66 percent in September from 71 percent in August. Thus there is evidence of OPEC strains and there is considerable uncertainty about real levels of 2010 demand, all of which makes for considerable uncertainty about prices. As can be seen in the above chart, World Bank oli price estimates (like the economic growth ones) have fluctuated from a 2010 price estimate of around $62.95 in March to the current (November) level of $75.29. While the earlier estimate may be considered to be too low, the current ones may well be too high, thus a level of $70 may not be an unrealistic forecast. It should be noted however that there are credible dissenters, and in a more or less reasoned analysis Capital Economics suggest that oil prices could well fall back again in 2010 to average somewhere around $50. If this forecast proves anywhere near correct, the Russian economy is going to be subject to major downside risks, due in particular to the difficulties posed by:br /br /i) financing the fiscal deficitbr /ii) rising unemploymentbr /iii) growing bad loans in the banking systembr /iv) refinancing external debtbr /v) the continuing high level of consumer price inflation and the difficulties this poses for monetary policy at the central bankbr /br /Added to all this, the economy will clearly not rebound as easily as many seem to foresee, adding to the risk element on all fronts.br /br /br /strongA Return To Growth In The Third Quarter/strongbr /br /Following the deep output drop sustained in the first half of the year (10.4% of GDP year on year), the slow recovery in global demand and rise in commodity prices has helped lift Russia’s economy up from its earlier lows. But the recovery has only been a modest one, since preliminary data indicate that the economy still registered a 9.4 percent year-on-year drop in the thrid quarter, indicating only a very small improvement (possibly a seasonally adjusted 0.6%) over the second quarter. More recent data also point towards a rather uneven progression, with the manufacturing sector falling back while rising real incomes means that consumer demand is producing stronger growth in the services sector.br /br /As in other countries, investment (both foreign and domestic) took a severe hit on the back of the credit crunch, and gross capital formation was indeedthe main demand side factor dragging GDP down in the first half of the year (by 14 percentage points), followed at some distance by consumption, which contributed 1.2 and 3.0 percentage points to aggregate output contraction rates respectively in the first and second quarters. Net exports, on the other hand, made a positive contribution (5.1 percentage points in the first quarter and 5.9 percentage points in the second) although strongas elsewhere/strong the strongdrop in imports/strong was the key factor. When imports are looked at in volume (price adjusted) terms we find that real ruble depreciation (the real effective exchange rate depreciated by 5.9 percent in the first nine months of 2009) meant that the import contraction was more severe than it seemed, especially in the second quarter of 2009 when the drop in imports meant that net exports increased by 66 percent.br /br /strongUnemployment Falls Back, But Problems Remainbr //strongbr /br /Six million Russians were added to the government’s official poverty count in the first quarter of this year alone, and by the end of 2009, 17.4 percent of the population or 24.6 million people will be living beneath the subsistence level of $185 per month, almost 5 percent more than before crisis, according to World Bank estimates. Unicredit analysts forecast that the number of Russians with disposable incomes of more than $1,000 per month will fall 48 percent this year to about 13.6 million, or roughly 9.6 percent of the population. Thus this recession is likely to have lasting and important results./pbr /pOn the hand, employment statistics from the Federal Statistics Service indicate that a sharp downward adjustment in the labour market took place up to February this year, before moderating and then reversing. Unemployment seems to have peaked in February at 9.5 percent following the sharp decline in output, and the severity of the blow was especially strong in the industrial sector. /pbr /pa href="http://1.bp.blogspot.com/_ngczZkrw340/Swv-srF1PgI/AAAAAAAAPng/ib8hHjWpxx8/s1600/russia+unemployment.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 201px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5407695821023297026" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Swv-srF1PgI/AAAAAAAAPng/ib8hHjWpxx8/s400/russia+unemployment.png" //abr /br /br /Since the beginning of March 2009, however, with real level of economic activity bottoming out (see above chart), the labor market continued to show moderate improvement: by September the number of those in employment had increased by 2.6 million, and the rate of unemployment fell to 7.6 percent, down significantly but still much higher than in September 2008 (5.8 percent). According to the World Bank this steady improvement is rather misleading as it reflects significant seasonal gains in employment and a shift in labor adjustment towards labor hoarding in the manufacturing sector.br /br /As the World Bank also notes, the long term regional differences in Russian unemployment rates are striking ranging from a low of 1.6 percent in Moscow to a high of 52.1 percent in Ingushetia in August 2009. Traditionally unemployment is largely concentrated in the Southern, Far Eastern and Siberian federal districts. However, the crisis related unemployment shows a different pattern, with the largest increases in unemployment being found in the North Western District (from 4.8 to 7 percent) and the Urals (from 4.9 to 8.1 percent). Regression analysis carried out by the World Bank revealed that unemployment levels were higher in those regions with higher levels of manufacturing, and where industrial production accounted for a larger share of GDP.br /br /And while it is entirely possible that the economy will show a “modest” recovery in the second half of 2009, this is “unlikely to have significant impact on social indicators,” according to the World Bank. Unemployment will increase to 9 percent “as seasonal factors wane” from 7.6 percent in September and it may take three years before the number of Russians living in poverty falls to pre-crisis levels, the World Bank estimates. Indeed, in the short term real incomes are “likely to fall further". /pbr /pstrongMonetary Policy Mess /strongbr /br /The political threat posed by growing unemployment and rising poverty must most certainly be one of the reasons behind Russia’s central bank recent decision to lowered its key interest rates for the eighth time in six months, in a bid to both stimulate lending and to stem the inflow of funds and the rise in the value of the ruble which is making the work of restoring competitiveness to the manufactured sector all the more difficult. Earlier this month Bank Rossii cut the refinancing rate to 9 percent from 9.5 percent and reduced the repurchase rate charged on central bank loans to 8 percent from 8.5 percent. Despite the reductions Russia still has the fourth-highest benchmark interest rate in Europe after Ukraine, Iceland and Serbia.br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/Sw24Z-mJeJI/AAAAAAAAPog/dK4SaanO7nc/s1600/russia+interest+rates.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 230px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5408181483981076626" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Sw24Z-mJeJI/AAAAAAAAPog/dK4SaanO7nc/s400/russia+interest+rates.png" //abr /br /The best thing that can be said about Russian monetary policy instruments is that they are hopelessly ineffictive. Even October consumer-price growth at 9.7% annually, while well down on June 2008s 15.1 percent peak, is still horribly unacceptable, and it is extremely hard to understand how economic mismanagement and incompetence can have reached such a level that an economy which has been contracting at the rate of nearly 10 per cent a year can still have this kind of price inflation. There is no other word for it, this is a mess.br /br /br /The bank is caught on the horns of a large dilema, since cutting rates further to stem inflows and the ruble rise may only risk fuelling more inflation, yet First Deputy Central Bank Chairman Alexei Ulyukayev stressed only last week that the central bank did not exclude the possibility of further cutting its rates in November and that its board could discuss a cut as early as Nov. 24. Indeed the bank stated explicitly at the end of October that it was ready and willing to use interest rate policy to stem speculative capital flows that "threaten to undermine currency stability". /pbr /pstrongInflation Woesbr //strongbr /One consolation at least in all this mess is that pressure on Russia’s producer prices have been easing, and prices have even been falling. According to the preliminary data from the State Statistics Service, the price of goods leaving factories and mines was in fact down an annual 10.8 percent in August following a record 12.3 percent drop in July. Evidently The with the 2008 spike in oil and energy prices the logic behind this is easy to see. What is not so easy to see is why domestic prices take so long in responding to general capacity utilisation signals and why the Economic Development Ministry still seems comfortable with the expectation that average inflation will range between 12 percent and 12.5 percent in 2009 only marginally down from last year’s 13.3 percent. Stunning!br /br //pbr /br /pa href="http://3.bp.blogspot.com/_ngczZkrw340/Sw0V_P4X0lI/AAAAAAAAPno/7WSwEAciAlg/s1600/russia+inflation.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 243px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5408002903880749650" border="0" alt="" src="http://3.bp.blogspot.com/_ngczZkrw340/Sw0V_P4X0lI/AAAAAAAAPno/7WSwEAciAlg/s400/russia+inflation.png" //abr /br /And while consumer price inflation has been tame in recent months this good behaviour may not last long, since it could rise more than expected in November, according to Deputy Economic Minister Andrei Klepach, a development that could prompt the central bank to bring its rate-cutting policy to a halt. Consumer prices could rise "by about 0.3% to 0.4%" in November, Klepach said in comments recently. And Klepach’s prediction seems to be near the mark, since consumer prices rose 0.1% in the week to 9 November, bringing to an end a period of just over three months without inflation, according to the latest data from the Federal Statistics Service. Looking into the future price growth may be further spurred by an influx of budget spending in the fourth quarter, as well as by a planned 30% increase in pensions which is due to come into effect on 1 December.br /br /The rising ruble, driven by higher oil prices and speculative capital seeking to capitalize on Russia's comparatively high interest rates, has put the central bank in a quandry. While a strengthening currency hurts the country's exporters, further rate cuts risk driving up inflation, which Prime Minister Vladimir Putin predicted – probably optimistically - would be just over 8% by the end of the year, which amazingly would be a post-Soviet low.br /br /In fact, despite the fact that inflationary pressures have been easing in Russia in recent months, chiefly due to collapsing consumer demand and outlfows of capital following the crisis that hit the country a year ago, Russia's inflation in January 2010 is only expected to be "significantly below "the level of January 2009, according to the First Deputy Chairman at the central bank Alexei Ulyukayev recently. This kind of argument is hardly reasssuring, since inflation last January was at an annual rate of 13.4%, and the suggestion now is that consumer prices will increase by between 0.2% and 0.3% in November and by the same amount in December.br /br /strongWhy Not Devalue?/strongbr /br /Well, one way not to solve the problem would be a ruble devaluation according to European Bank for Reconstruction and Development Chief Economist Erik Berglof. Even while recognising that the country has a very difficult couple of years in front of it, Berglof argued recently “this (devaluation) is the wrong way to think about the recovery in Russia”.br /br /As he said, Russia’s failure to wean itself off its reliance on commodity exports has condemned the country struggling to find economic growth in the face of a large drop in demand for its key export products. “If you want to have a flexible exchange rate, you need to get out of this dependence on commodities,” Berglof said. “It’s a major concern that in the last 10 years Russia has become actually more dependent on commodities. Unfortunately, not much progress has been made.”br /br /Well, this is eaxctly the point, and is why I have been arguing over the last two year about how a href="http://russiatooat.blogspot.com/2007/12/inflation-in-russia-two-much-money.html"all those wage increases which the Russian administration seemed to rejoice in/a (since they bought short term popularity, and fuelled consumption) simply stoked-up the domestic inflation bonfire and in the process did untold damage to domestic competitiveness. However it is evident Russia's industries cannot now simply be transformed overnight, and this is where I find a weakness in Berglofs argument, since some remedy is needed to straighten out the distortions and get of commodity export dependence. But what? If it isn't devaluation, then surely we will need to see very substantial wage deflation in order to attract the now much needed inward foreign investment.br /br /Of course not everyone agrees with Berglof, and the Russian Association of Regional Banks, whose 450 members include the Russian units of Barclays and Citigroup, has called for a devaluation of as much as 30 percent. Billionaire Vladimir Potanin, realist and owner of 25 percent of OAO GMK Norilsk Nickel, said in recent interview with the Russian Newspaper Vedomosti that the “interests of the economy” will lead the currency to depreciate in the “mid term,” allowing exporters to cut costs and modernize production.br /br /Nonetheless energy, including oil and natural gas, accounted for 69.1 percent of exports to countries outside the former Soviet Union and the Baltic states during the first seven months of this year, according to the Federal Customs Service, while metals were responsible for another 12%. So the commodities dependency is massive, and this situation can't be turned round easily.br /br /strongGetting Carried Away By Global Liquidity?/strongbr /br /Bank Rossi are also not 100% convinced by the merits of Berglof's reasoning, as witnessed by the fact that they facilitated a 35 percent depreciation in the ruble during the second half of last year (see chart below), and as the collapse in raw material prices and the dramatic change in local credit conditions first pushed Russia's economy into recession the ruble’s trading range was widened to between 26 and 41 against the dollar-euro basket.br //pbr /pHowever, as I keep stressing, the central bank is now locked on the horns of a massive dilemma, since as risk appetite returns, with it comes the enthusiasm for buying the so called "high yield" currencies - like the South African Rand, the Russian ruble and the Hungarian forint. Instruments denominated in all these currencies offer investors substantial returns at the present time thanks to offering some of the highest interest rates among globally traded currencies.br /br /Indeed buying Russian rubles was one of the key recommendations made by Angus Halkett, currency strategist at Deutsche Bank in London, in a research report published back in April, and the market seems to have followed his advice The so-called carry trade works by investors borrowing in currencies with low interest rates and good prospects of continuing depreciation (the USD at the moment, for example) in order to buy higher-yielding assets, in countries with high domestic interest rates and continuing prospects for ongoing appreciation.br /br /In general, engaging in one or other form of the thousand-and-one-varieties carry trade is pretty standard practice during times when returns for real economic activity are low, and central banks hold down rates and supply liquidity. Indeed we may include here the kind of carry practiced by banks in borrowing from the central banks only to then lend - for a small, but very low risk, interest rate commission - to their national government, who at this stage in the business cycle will normally be running a fiscal deficit. So more than funding recovery, the watchword at the moment is very much "carry on carrying".br /br /But for those on the receiving end, the consequences of so much carry are far from innocuous, since the process simply funds all sorts of economic distortions, and far from allowing normal market corrections to occur, it simply amplifies the problem. And this is exactly what is starting to happen now in Russia. The ruble had its biggest weekly advance in more than three months last week as risk sentiment rose, following industrial output data from China, which is now the world’s second-largest energy user, which simply showed output increased at a faster pace than forecast.br /br /As a result the ruble tends to rise as risk sentiment does, and in particular as economic data exceeds consensus expectations, and the currency has now been on an upward trend since mid-August (see chart below), gaining 0.7 percent to 30.6629 per dollar last Friday alone. This was the highest close since July 27. Over the week as a whole the ruble appreciated 3.1 percent, the most since the week ending May 22. So things are now becoming very detached from the so called "fundamentals" (whatever those might be in the topsy turvy world in which we now live), since it simply is not plausible that the currency should be rising in this way in a country with 12 percent consumer price inflation and which badly needs to move away from commodity export dependency. The only conclusion which could be drawn is that the Russian economy now needs massive structural reforms, and on any imaginable scenario in the world in which I live these are simply not going to be implemented.br /br /On the other hand Russia’s central bank may have to accept a stronger ruble next year as rising commodity prices prove too powerful a force for policy makers to counter and as consumer demand plays a bigger role in the bank’s decisions. The authorities “will try to do what they can to smooth the appreciation, but it’s very hard to go against the flow,” said Guillaume Tresca, Paris-based emerging market strategist for Calyon, the investment-banking unit of Credit Agricole. “Capital inflows are massive.”br /br /Policy makers have indicated they will cap the ruble’s gains and Prime Minister Vladimir Putin has said his government won’t allow an excessive appreciation as exporters struggle to tap into a global trade recovery. Even so, efforts to fight the ruble’s advance may prove “unproductive,” the International Monetary Fund warned on Nov. 12, adding that “underlying factors” justify its strength. There is a growing consensus that Russia’s central bank is now close to accepting the inevitable, and will allow the ruble to continue appreciating to help domestic demand and cap inflation. As Clemens Grafe, chief economist at UBS in Moscow puts it, “A higher exchange rate, because it transfers incomes into people’s pockets, could actually be more beneficial,”br /br /strongFiscal Resources Near To Running On Empty?/strongbr /br /br /According to preliminary estimates from the Ministry of Finance, the federal budget deficit totaled 4.0 percent between January and September, slightly below the expected level, in part due to the under execution of budgeted expenditures in the first three quarters of 2009. The federal non-oil deficit (which excludes drawing on oil revenues) amounted to 11.0 percent. This is managable, especially given the comparatively low level of Russian sovereign debt to GDP. However, as the World Bank point out under the likely scenario of a sluggish global recovery and modest growth, Russia will face a tightening budget constraint and need to reduce expenditures and the fiscal deficit over the medium term. Further, funding the planned increase in social expenditures, mainly related to increases in pensions, may well requires spending cuts in other expenditure categories. /pbr /br /pThe Ministry of Finance baseline federal budget estimates with conservative oil assumptions icorporate plans to reduce the federal budget deficit from 8.3 percent of GDP in 2009 to 3 percent in 2012, but the medium term fiscal outlook also indicates an extensive drawdown of Russia's Reserve Fund to finance the deficit. Given the size of the anticipated deficit, the Reserve Fund is likely to be depleted by the end of 2010 and borrowing will be required to offset the gap. Estimates of the Ministry of Finance indicate that the combined external and internal borrowing to cover the fiscal deficit will amount to 1.0 percent of GDP in 2009, 1.6 percent in 2010, 2.5 percent in 2011, and 1.5 percent in 2012. All of this is manageble, but the depletion of the Reserve Fund does mean that if downside risks materialise, and in particular if there are more writedowns in the banking sector needing government support that there is now little in the way of a cushion between managed adjustement and unstable dynamics.br /br /br /strongOutlook – A Hard Road To Travel/strongbr /br /br /If one thing is clear hear it is that attaining a recovery in Russia's economic fortunes at this point is going to be no easy feat, as a href="http://www.bloomberg.com/apps/news?pid=newsarchiveamp;sid=aC8Q3ycECRlw"Trust Investment Bank put it in their latest report/a, October data for the world’s largest energy exporter suggest “an almost complete absence of clear signs of recovery” since industrial output slumped and capital investment fell. October capital investment was still down 17.9 percent while industrial output dropped an annual 11.2 percent in October worse than the September reading. Even unemplyment was up again, at 7.7%, although as the World Bank pointed out, this is the result of the same seasonal factors which lead to the fall in unemployment over the summer. Dbr /br /On the other hand disposable incomes climbed a monthly 6 percent in October and rose 3.9 percent compared with the same period last year, the biggest annual jump since September 2008, according to provisional data from the Federal Statistics Service, while wage declines eased with wages falling an annual 4.5 percent, compared with a 4.9 percent annual decline in September. And retail sales, which had previously fallen for nine consecutive months, the longest period of declines on record, suddenly sprang back to life, with October retail sales rose 3.2 percent from September and declined by 8.5 percent on an annual basis as compared with a 9.9 percent drop the month before.br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/Sw0ZKg7CYQI/AAAAAAAAPnw/bQRC4SINF3E/s1600/russia+retail+sales.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 242px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5408006395968774402" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Sw0ZKg7CYQI/AAAAAAAAPnw/bQRC4SINF3E/s400/russia+retail+sales.png" //abr /br /Other data also show this mixed picture. Monthly GDP Indicator data from VTB Capital, based on the PMI surveys for the Russian manufacturing and service sectors, continued to show economic contraction on an annual basis in October, butthe rate of decline eased for the fifth consecutive month. The Indicator showed a 0.6% annual contraction, the slowest rate seen suring the current eleven-month period of continuous decline.br /br /a href="http://4.bp.blogspot.com/_ngczZkrw340/Sw2smUlPK_I/AAAAAAAAPoA/Det1Qvhq7ls/s1600/GDP+indicator+2.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 243px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5408168501901732850" border="0" alt="" src="http://4.bp.blogspot.com/_ngczZkrw340/Sw2smUlPK_I/AAAAAAAAPoA/Det1Qvhq7ls/s400/GDP+indicator+2.png" //abr /br /The seasonally adjusted Total Activity Index remained above the no-change mark of 50.0 for the third month running in October, indicating growth of private sector output. The Index improved fractionally over September, to 54.2, indicating reasonably robust growth (although it remained below its historic trend of 56.6). This was driven by a faster rise in services activity, while the rate of growth in manufacturing production slowed to a weaker pace. On a quarterly basis the indicator showed 0.4% q-o-q growth for the second month running.br /br /a href="http://2.bp.blogspot.com/_ngczZkrw340/Sw2qzRN1UlI/AAAAAAAAPn4/h6pCnqcA1nI/s1600/GDP+Indicator+One.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 242px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5408166525313307218" border="0" alt="" src="http://2.bp.blogspot.com/_ngczZkrw340/Sw2qzRN1UlI/AAAAAAAAPn4/h6pCnqcA1nI/s400/GDP+Indicator+One.png" //abr /br /blockquoteCommenting on the survey, Aleksandra Evtifyeva, Senior Economist at VTB Capital, reported:br /br /““The GDP Indicator continued to point to an improvement in economic activity in October. The manufacturing sector’s performance deteriorated slightly while activity in the services sector is approaching pre-crisis levels. This might be one of the consequences of higher oil prices and a stronger rouble as low export orders were the main drag on manufacturing. Another encouraging development highlighted by the October surveys was the deceleration in the pace of job cuts: the employment sub-indices now stand at around 47, which is already higher than last autumn./blockquotebr /The GDP indicator reading was based on manufacturing sector survey findings which confirmed that overall Russian manufacturing business conditions deteriorated in October. Although output, new orders and input purchases all continued to grow, the rates of expansion slowed compared to September. Moreover, manufacturers shed jobs at a faster pace than in September.br /br /The headline seasonally adjusted Russian Manufacturing PMI fell from 52.0 in September to 49.6 in October, signalling an overall deterioration in the business climate at the start of the fourth quarter. It was the first month-on-month fall in the headline index since it plummeted to a record low (33.8) in December 2008, although the latest figure was indicative of only a marginal rate of decline. Of particular note, the new export orders index posted a strongish decline to 47.8, evidently reflecting the recent ruble appreciation. The input price index continued to point to strong rise in costs associated with metals, energy and oil-related items while output prices index pointed to a moderating growth in price charged.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sw2xWi1TESI/AAAAAAAAPoI/50mTeapNq4s/s1600/russia.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 244px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5408173728407425314" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sw2xWi1TESI/AAAAAAAAPoI/50mTeapNq4s/s400/russia.png" //abr /br /In contrast the rebound in Russian services activity rose continued in October, supported by a record fall in charges, and Russia's services sector, which accounts for about 40 percent of the economy, rose for the third consecutive month, reaching its highest level since September 2008, although the reading of 54.3 still remained significantly below the long-run series average.br /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sw2yMDZ9MQI/AAAAAAAAPoQ/ZbQ0hewWC1Y/s1600/russia.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 243px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5408174647684182274" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sw2yMDZ9MQI/AAAAAAAAPoQ/ZbQ0hewWC1Y/s400/russia.png" //abr /br /br /strongSo Where Do We Go From Here?/strongbr /br /In contrast to the most recent PMI data and the opinions of analysts like Neil Shearing at Capital Economics and Trust Investment Bank , Russia's political leaders are markedly more optimistic. Russia’s economy may expand as much as 4 percent in the last quarter of 2009 following a timid return to growth in the third quarter, according to Deputy Economy Minister Andrei Klepach speaking at a conference in Moscow recently. The economy may show “quite strong growth” of between 3 percent and 4 percent in the fourth quarter over the previous three months, Klepach said. This is an interesting claim, and doubly so given that Klepach has been quite cautious so far this year in his claims. Evidently the rising price of oil and the return of some financial flows into Russia is firing up optimism, as are the numbers for retail sales, we will just have to hope they won't fire up the inflation process again, although with lending to households still stuck in gridlock, perhaps the dangers here should not be overstated. More worryingly, inflation may fail to fall significantly from its current high level, even as the central bank reduces interest rates in a bid to stem the ruble rise.br /br /Klepach's optimism is not shared, however, by the World Bank who in their latest report argue Russia’s economy will suffer a deeper contraction than they previously estimated this year even after a series of central bank interest rate cuts which have manifestly failed to ease the “prolonged” credit drought. The World Bank now expect the Russian economy to contract by 8.7 percent this year, compared with their June forecast for a 7.9 percent decline. The government is currently predicting the economy will shrink 8.5 percent this year and grow 1.6 percent next year.br /br /br /blockquote“We expect that the central bank will continue lowering its policy rate in thebr /near future to facilitate credit to the real sector,” the World Bank said. “Thebr /impact, however, appears to be limited. The policy rates are mostly indicative,br /while the cost of credit remains very high.”/blockquoteThe OECD, on the other hand, seems rather more positive, arguing that Russia’s economy will enjoy a stronger commodity-driven rebound than first estimated, although, they hasten to add, authorities should avoid a sudden removal of stimulus measures to ensure the domestic economy keeps up the pace of its advance. They now expect the Russian economy to expand by 4.9 percent in 2010, compared with a June forecast for 3.7 percent growth, although output is still expected to contract 8.7 percent this year (broadly in line with the World Bank), more than the 6.8 percent estimated in June. The 2010 figure seems very optimistic in the light of the problems here identified, and more than adding to our appreciation of the Russian situation such numbers may rather cast doubt on the methodology being applied, and raise questions about some of the numbers being seen for other countries.br /br /br /blockquote“Although recovery is in prospect, the large output gap and subdued inflation suggest that policy stimulus should not be removed too hastily,” the OECD said. “Fiscal policy should be managed to avoid dislocative demand effects from a surge of expenditures in late 2009 followed by a tightening in 2010.” /blockquotebr /According to the OECD, Russia’s economy will enjoy a stronger commodity-driven rebound than first estimated and “Fiscal and monetary stimulus and the recovery of global demand should result in a strong rebound of output towards the end of 2009". The basic OECD argument is that “A large part of the policy stimulus will be felt only late in the year, as fiscal expenditure is back-loaded and a series of interest rate cuts began only in the second quarter.”br /br /strongLong Term Impact On Russian Growth/strongbr /br /But let us not underestimate the difficulties. According to the World Bank Russia’s real GDP will likely return to pre-crisis levels only in late 2012. And, the Bank says, without a more productive, diversified, and competitive economic base, its long-term growth is likely to be slower than in the past decade and than the pre-crisis expectationbr /br /a href="http://1.bp.blogspot.com/_ngczZkrw340/Sw21w05Cq4I/AAAAAAAAPoY/BxotSEDWSOI/s1600/Russia+Trend+Growth.png"img style="TEXT-ALIGN: center; MARGIN: 0px auto 10px; WIDTH: 400px; DISPLAY: block; HEIGHT: 213px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5408178577978076034" border="0" alt="" src="http://1.bp.blogspot.com/_ngczZkrw340/Sw21w05Cq4I/AAAAAAAAPoY/BxotSEDWSOI/s400/Russia+Trend+Growth.png" //abr /br /Russia’s pre-crisis decade of prosperity was built on strong capital inflows, rising consumer and corporate credit, and significant capital investment. The post-crisis world will look very different: Russia will need to implement fiscal adjustment and diversify its economy in the context of sluggish global growth, low capital flows, and more limited access to foreign financing. So it is now time to look towards a new growth model based on increases in productivity and know-how and on more efficient allocation and use of investment, labor, and FDI. Next generation reforms should be geared to make Russia's monetary policy instruments much more effective, the Russian economy much more productive, diversified, and open—and more able to respond to future shocks. The success and duration of the transition from the current model of heavy dependence of natural resources to a more sustainable growth model depends, according to the World Bank on maintaining a competitive exchange rate, sustaining a prudent fiscal stance, improving the investment climate, more mobile capital and labor, making the financial sector deeper and more efficient, investing in infrastructure to eliminate key bottlenecks to growth, and strengthening governance and fighting corruption as part of the overall effort to improve the effectiveness of the public sector.br /br /The OECD more or less agrees: “Laying the foundations for sustained rapid growth will require unwinding some of the distortive consequences of the crisis". And, may I add, unwinding some of the distortive processes which lead the crisis to be such a severe one in the first place.div class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/7303901362201842397-2825345067395600868?l=russiatooat.blogspot.com' alt='' //div

Grigory Pasko: Journalists Are Fleeing Russia

Robert Amsterdam — Fri, 20 Nov 2009 18:20:03 +0000

Если Вы хотите прочитать оригинал данной статьи на русском языке, нажмите сюда. A well-known Russian journalist, head of the Center for Journalism in Extreme Situations Oleg Panfilov in early November moved for permanent residency from Moscow to Tbilisi. In a...

Evgeny Lebedev and the Londongrad Blues

Robert Amsterdam — Fri, 20 Nov 2009 17:44:02 +0000

This week's lunch with the FT features Peter Aspden sitting down for some sushi and a harmless bit of obsequiousness with Evgeny Lebedev, the son of Alexander Lebedev. The conversation has some interesting points ... such as his potshots at...

Energy Blast – Nov 20, 2009

Robert Amsterdam — Fri, 20 Nov 2009 10:40:01 +0000

Reports have emerged following yesterday's meeting between 'comfortable' duo Vladimir Putin and his Ukrainian counterpart, Yulia Tymoshenko. Bloomberg says Putin's announcement that Ukraine would not be penalized for consuming less gas than was contracted was warmly received by Tymoshenko, who pledged...

Grigory Pasko: Disturbance Factor

Robert Amsterdam — Thu, 19 Nov 2009 19:45:44 +0000

They were shooting...Yesterday. In the forest. In Vladimir Oblast. A shot thundered practically right over my head. Luckily for me and for the duck flushed from the mirror-like marsh, the hunter missed. Если Вы хотите прочитать оригинал данной статьи на...

New York Times Magazine Profiles Mikhail Khodorkovsky

Robert Amsterdam — Thu, 19 Nov 2009 17:21:05 +0000

Andrew Meier has penned an epic, wide ranging profile of the second trial of Mikhail Khodorkovsky in The New York Times Magazine, which captures a sense of the courtroom, the personalities, and the historical context of the affair. For readers...

Corruption and Death in Russia

Robert Amsterdam — Wed, 18 Nov 2009 21:31:06 +0000

Voice of America has published an important piece on the death of Hermitage lawyer Sergei Magnitsky and the practice of medical blackmail in Russian prisons:Magnitsky developed problems with his pancreas and gall bladder as a result of what his American...

Activist Murdered in Moscow

Robert Amsterdam — Tue, 17 Nov 2009 18:45:37 +0000

Ivan Khutorskoy, an anti-fascist activist, has been murdered by gunfire in Moscow today in what some colleagues are calling a possible retaliation. According to the Reuters coverage, the murder may have been related to the arrests of individuals in...

The Return of Medical Blackmail

Robert Amsterdam — Tue, 17 Nov 2009 15:30:41 +0000

The following is a press release being sent around by Hermitage Capital Management with regard to the death last night of Sergei Magnitsky. The link to the 40-page complaint by Magnitsky to Chief Prosecutor Yuri Chaika detailing the urgent care...

Unlawfully Jailed Hermitage Lawyer Dies in Custody

Robert Amsterdam — Tue, 17 Nov 2009 12:38:35 +0000

This is horrible, horrible news, especially considering the circumstances behind the arrest of Sergei Magnitsky, a lawyer involved in the William Browder and Hermitage Capital affair (this saga of state corruption is best told in a ten minute film released...

RA’s Daily Russian News Blast – Nov 13, 2009

Robert Amsterdam — Fri, 13 Nov 2009 08:46:24 +0000

TODAY: Medvedev's state of the nation address warns opposition against using democracy to rock the boat; talks up modernization. Media unconvinced President can match word with deed. Topol-M problem for START replacement talks; Litvinenko suspect Lugovoi willing to speak to...

Who Got The Power?

Robert Amsterdam — Thu, 12 Nov 2009 14:51:40 +0000

Vladimir Putin has been ranked number 3 in the Forbes list of the most powerful people in the world, President Medvedev comes in 43rd, after Deputy Prime Minister, siloviki chieftain and Rosneft chairman Igor Sechin at number 42. (See the...

Corruption Blast

Robert Amsterdam — Wed, 11 Nov 2009 15:58:39 +0000

Today has not been a good day for the respectability of Russia's organizations. Firstly we have the weekend's police corruption You Tube video, whose revelations about alleged case fabrications and all manner of other dishonest practices have put quite a...

Cop Takes Corruption Campaign To Moscow

Robert Amsterdam — Wed, 11 Nov 2009 14:39:23 +0000

RFE/RL follows the movements of former police major and new You Tube star Aleksei Dymovsky, whose campaign against corruption in the police forces has caused a storm of controversy. According to an article by Brian Whitmore, Dymovsky avowed at a...

Why the Fall of the Wall Meant So Much

Frank Holmes — Wed, 11 Nov 2009 06:00:00 +0000

Twenty years ago this week, the Berlin Wall fell and in doing so, set off a string of momentous events that in short order saw the reunification of Germany, the collapse of the Soviet Union, and freedoms and democracy spread across a long-oppressed part of the world. Few events in modern history have had such a significant impact on the lives of so many people, but momentum for the wallrsquo;s fall began years earlier. A member of our investment team who grew up in Poland points out the important role played by Polish leader Lech Walesa, the shipyard electrician who led the Solidarity labor movement that drew support from around the world. Solidarityrsquo;s success in creating the first free trade union behind the Iron Curtain weakened the regionrsquo;s Communist governments and won Walesa the Nobel Peace Prize. Walesa, later Polandrsquo;s first post-Communist president, was in Berlin this week to tip over the first in a series of artistic dominos representing pivotal events from that time. A member of our team who grew up in Azerbaijan during the Soviet era describes the Berlin Wall as the line in the sand for the Soviets. Once it was gone, it was a natural next step for the former Soviet republics to pursue their own independence. Prior to the wallrsquo;s fall, defiance of Moscow was rare in the Soviet republics, but that changed quickly. By the early 1990s, the Soviet Union was no more ndash; an outcome that few would have believed possible just a couple of years earlier. As global investors, we watch government policies for peace and prosperity as part of our investment process. The dramatic changes in the former Soviet bloc, for example, led us to create our Eastern European Fund (EUROX) in 1997 ndash; this was one of the first funds focusing on this region. Having a diverse investment team is a tremendous asset in helping us to spot opportunities arising from important global events. Please consider carefully a fundrsquo;s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc. By investing in a specific geographic region, a regional fundrsquo;s returns and share price may be more volatile than those of a less concentrated portfolio. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. The Eastern European Fund invests more than 25% of its investments in companies principally engaged in the oil amp; gas or banking industries. nbsp;The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fundrsquo;s performance more volatile. #09-795

Pasko: Dvorishchi ain’t no Cape Town

Robert Amsterdam — Tue, 10 Nov 2009 19:03:05 +0000

The last week of October was a tense time for the bureaucrats at Minprirody, Russia's Ministry for the Protection of the Environment and Natural Resources, and naturally for Minister Yuri Petrovich Trutnev. He went all the way to Cape Town,...

Pipeline Pact

Robert Amsterdam — Tue, 10 Nov 2009 15:12:28 +0000

This in from the Wall Street Journal on the somewhat disturbing, political dimensions of Russia's Nord Stream pipeline. Approved just last week by Finland and Sweden after ecological concerns were overcome, the project is now ready to get off the...

Time To Stop Making Excuses

Robert Amsterdam — Tue, 10 Nov 2009 12:47:10 +0000

President Medvedev proclaimed in his recent Der Spiegel interview that there is little difference between the rights record of Russia and that of its European counterparts: 'Our values are the same as yours. I don't see any major differences in...

RA’s Daily Russian News Blast – Nov 10, 2009

Robert Amsterdam — Tue, 10 Nov 2009 09:25:36 +0000

TODAY: Youtube policeman faces slander investigation; Omsk students threatened with expulsion; Committee to Protect Journalists urge global attention to threats against media in Russia. Merkel thanks Gorbachev; Medvedev approves new military bill; advocates abolition of death penalty. Delay for Gazprom...

Russia: The Playground Bully?

Robert Amsterdam — Fri, 06 Nov 2009 14:29:02 +0000

Russia's Foreign Minister Sergei Lavrov is apparently 'astonished' to hear that Poland's Foreign Minister, Radoslaw Sikorski, asked NATO and the US to deploy troops in Europe to provide 'some strategic reassurance', on a recent visit to Washington. Since the scrapping...

RA’s Daily Russian News Blast – Nov 6, 2009

Robert Amsterdam — Fri, 06 Nov 2009 09:10:02 +0000

TODAY: Markelov murder suspect reportedly confesses; vengeance a possible motive? Activist abducted in Moscow. Spy chief issues warning on Georgia; Lavrov surprised at Poland soliciting US help. Medvedev reserves army use for emergencies. Luzhkov lays into Abramovich; new vodka...

Censoring The Census

Robert Amsterdam — Thu, 05 Nov 2009 11:50:57 +0000

As many frequent readers of the Russian media would attest, retrieving accurate data pertaining to any sensitive topic can prove difficult. It is thus reassuring to see that Russia has agreed to hold its census next year, at a cost...

Energy Blast – Nov 5, 2009

Robert Amsterdam — Thu, 05 Nov 2009 09:53:21 +0000

Naftogaz Ukrainy has apparently released a statement admitting that a 'dire economic situation' means that the company is struggling to pay its October gas bill. The Moscow Times reports however that Ukrainian Energy Minister Yury Prodan has assured Russia that...

Gas Crisis Cooling Down?

Robert Amsterdam — Wed, 04 Nov 2009 13:01:38 +0000

Winter is upon us, and the last couple of days have seen rumors rumbling about the possibility of another gas interruption - due to payment problems at Ukraine's end. It is alleged that Ukrainian Prime Minister Yulia Tymoshenko alerted Vladimir...

Will Russia Deliver On Iran?

Robert Amsterdam — Tue, 03 Nov 2009 12:28:09 +0000

Today's POLITICUS in the New York Times tries to fathom the extent to which NATO and the Western powers really trust Russia to cooperate in putting pressure on Iran, regarding its nuclear programme. Whilst certain recent moves by the West...

Today in Russian Business – Nov 3, 2009

Robert Amsterdam — Tue, 03 Nov 2009 10:01:35 +0000

Jason Bush in Forbes suggests that Russia's recovery may be buoyant: 'while the Russian government is still cautiously forecasting 2 percent GDP growth in 2010, many independent economists are already predicting growth of as much as 5 percent next...

RA’s Daily Russian News Blast – Nov 3, 2009

Robert Amsterdam — Tue, 03 Nov 2009 09:08:54 +0000

TODAY: Opposition activist torture claims; Miliband leaves with no breakthrough regarding diplomatic concerns; meets with rights activists; Putin and Medvedev popularity waning?; President in need of own power structure to realize reforms; Stalin resurrection an identity issue; Gorbachev on...

Miliband in Moscow and the need to link Russia-UK relations with human rights

Robert Amsterdam — Mon, 02 Nov 2009 22:53:34 +0000

Bob has an opinion article in today's edition of the Guardian stressing the importance of linking human rights with foreign relations during David Miliband's visit to Russia this week, and elsewhere in the same paper, Mikhail Khodorkovsky's mother has issued...

British Counsel

Robert Amsterdam — Fri, 30 Oct 2009 11:17:05 +0000

British-Russian relations have suffered greatly in recent years, with a series of incidents souring relations: the Alexander Litvinenko scandal, the British Council restrictions, diplomatic exits and various extradition rows. Foreign Secretary David Milliband will visit Russia next week, the first...

Energy Blast – Oct 29, 2009

Robert Amsterdam — Thu, 29 Oct 2009 09:45:24 +0000

A new World Bank report says that Russia is likely to bear the brunt of changes to regional climate brought on by global warming. Gazprom, currently feuding with Rosneft over blocked access to energy infrastructure, may rework its 'tough line' of fining European...

An Unlikely PR Tool

Robert Amsterdam — Wed, 28 Oct 2009 14:33:18 +0000

There's a very interesting article on euobserver.com about Russia's attempts to re-brand itself as a benign global power in the eyes of Brussels. The piece reports that news agency Ria-Novosti has apparently engaged the services of low-profile PR consultancy RJI...

Energy Blast – Oct 28, 2009

Robert Amsterdam — Wed, 28 Oct 2009 09:23:08 +0000

Rosneft has been fined $180 million by the Federal Anti-Monopoly Service for deliberately driving up wholesale prices for gasoline and other oil products in the first half of 2009, and Lukoil was warned that it could face a similar penalty...in...

Today in Russian Business – Oct 27, 2009

Robert Amsterdam — Tue, 27 Oct 2009 08:38:06 +0000

The first Russian-assembled Opel car, the result of a joint venture between General Motors and the Avtotor plant, has been completed. RusAl has reported its 2008 losses, saying that it sustained a $5.98 billion hit due to the financial crisis....

Maksharip Aushev Killed

Robert Amsterdam — Mon, 26 Oct 2009 10:20:32 +0000

Today's headlines speak of the bleak but sadly not unfamiliar news of another human rights activist being murdered in the North Caucasus. On Sunday, businessman and rights defender Maksharip Aushev was killed when 60 rounds of bullets were sprayed into...

Today in Russian Business – Oct 26, 2009

Robert Amsterdam — Mon, 26 Oct 2009 09:22:26 +0000

The ever-positive Vladimir Putin is forecasting 8% inflation for the coming year, which would be a 'post-Soviet low'. The government will sell tons of its gold stockpile this year to cover its budget deficit and help it fund other supporting...

SUPPORT KHODORKOVSKY ON TWITTER

Robert Amsterdam — Sun, 25 Oct 2009 14:14:01 +0000

As many of you know, today is the sixth anniversary of the arrest of Mikhail Khodorkovsky. On Oct. 25, 2003, a team of spetsnaz armed to the teeth raided an airplane on a snowy Novosibirsk runway, behaving as though they...

Six Years of Russian Injustice

Robert Amsterdam — Sat, 24 Oct 2009 23:08:54 +0000

From Robert Amsterdam's latest in the Huffington Post:But it is clear to those of us who have watched and listened to Khodorkovsky over these years that his beliefs, spirit and convictions have only deepened. When he first became a political...

The Convict who Frightens the Kremlin

Robert Amsterdam — Fri, 23 Oct 2009 12:48:17 +0000

The following is a translation of an article about the second trial of Mikhail Khodorkovsky published in the French weekly magazine, Le Nouvel Observateur. The Convict who Frightens the Kremlin From our special correspondent in Moscow Mikhail Khodorkovsky, former head...

Putting The TV On Mute

Robert Amsterdam — Thu, 22 Oct 2009 13:25:27 +0000

An interesting opinion piece today by Vladimir Ryzhkov in the Moscow Times sees one of the last bastions of media freedom - Ren TV - looking like it may have to fight for its independence. The increasingly popular station,...

Belgrade And Moscow Tie Energy Knot

Robert Amsterdam — Wed, 21 Oct 2009 13:50:27 +0000

The first ever visit by a Russian President to Serbia has yielded another 'strategic partnership', this time soldered with a $1.5 billion loan to the debt-hit nation. A certain diplomatic interdependence between the two countries seems to be a de...

Translation from Le Point: Accused Khodorkovsky, Stand Up!

Robert Amsterdam — Fri, 16 Oct 2009 14:55:50 +0000

Kafkaesque. The former Russian oil tycoon, who stood up to Putin, is back before his judges. Here is the story. [The following is a translation of an article published in the French publication Le Point.] Le Point, October 15, 2009...

Today in Russian Business – October 16, 2009

Robert Amsterdam — Fri, 16 Oct 2009 09:20:31 +0000

According to the FT, Russia, Belarus and Kazakhstan have abandoned their attempt to join the World Trade Organization as a single customs union, after WTO members made clear the unprecedented suggestion would elongate the process by some years. The trio...

RA’s Daily Russian News Blast – October 15, 2009

Robert Amsterdam — Thu, 15 Oct 2009 08:24:50 +0000

TODAY: Clinton turns attention to civil society and gives speech tackling human rights abuses; Walt Whitman statue unveiled; Putin advises against intimidating Iran; opposition politicians stage Duma walk out. Memorial to appeal. Putin turns pop svengali?'In an innovative society, people...

Russia Is Tacking Like a Sailboat

Robert Amsterdam — Wed, 14 Oct 2009 14:06:01 +0000

Good analysis from Douglas Birch of the Associated Press:So Moscow has walked a tightrope: joining Iran in scolding the West for its alleged imperial ambitions and blocking sanctions on the one hand, while warning Tehran it will not tolerate a...

Michael McFaul’s Change of Heart

Robert Amsterdam — Wed, 14 Oct 2009 13:10:08 +0000

Yesterday I blogged that neither Vladislav Surkov nor Michael McFaul are reading from the same script as they were a few years ago. Here's a good example how, buried in an FT story on the Iran sanctions doublespeak:This fear seemed...

RA’s Daily Russian News Blast – October 14, 2009

Robert Amsterdam — Wed, 14 Oct 2009 08:25:08 +0000

TODAY: Did Clinton get what she wanted?; media reports possible silence for sanctions deal; START treaty progress. Georgia accused of abetting al-Qaida; Putin 'satisfied' with job. German official castigates Medvedev for investigation into Stalin-researching historian; the man of steel's grandson...

MBT Acquires Stake In Comstar-UTS – Analyst Blog

Zacks Market Commentaries — Tue, 13 Oct 2009 19:18:04 +0000

Mobile TeleSystems (MBT), Russia and Eastern Europe’s largest cellular operator, has reportedly acquired a 50.91% stake in Comstar-United TeleSystems (Comstar-UTS), a leading integrated telecommunication solution provider in Russia and the CIS.

The incumbent Russian telecom carrier has acquired the stake from AFK Sistema, a Russia-based financial and industrial holding company, for RUR39.15 billion (US$1.32 billion) having received all the necessary regulatory approvals for the transaction.

Comstar-UTS comprises fixed-line operator Moscow City Telephone Network (“MGTS") and STREAM-TV, a leading Russian cable TV and Internet service provider. The company holds a major share in the broadband and IPTV markets in Moscow. Comstar-UTS also offers value-added “Triple-Play" bundled (voice, Internet and pat-TV) services to its customers.

Comstar-UTS currently operates in 70 Russian cities, covering a total population of over 48 million people. At the end of first-half 2009, the company served 4.4 million fixed telephony subscribers, nearly 1.2 million broadband Internet customers and 2 million pay-TV subscribers.

While Mobile TeleSystems is the market leader in Russia, the company is increasingly exposed to intense pricing pressure across most of its operating regions fueled by aggressive competition. This has led to declining operating margins as evidenced by the last quarter’s results. In contrast, the company’s archrival VimpelCom (VIP) continues to grow at a respectable pace.

VimpelCom has strenghened its opportunity in the residential broadband market by acquiring Golden Telecom Inc, a leading provider of broadband Internet services in Russia and the CIS, in February 2008. This acquisition has strengthened VimpelCom’s offerings to wireline backhaul, corporate telecom and broadband access segments, and extended services beyond the traditional cellular networking.

To remain competitive, Mobile TeleSystems is pursuing a similar strategy by acquiring a controlling stake in Comstar-UTS. In addition to extending growth opportunities in commercial and residential broadband markets, the transaction will provide considerable cost and operational synergies while facilitating the development and roll out of innovative services.

Read the full analyst report on "MBT"
Read the full analyst report on "VIP"
Zacks Investment Research

VASC, VNDA, PGNE, DrStockPick.com Watch List! for Tuesday October 13, 2009, Vascular Solutions Inc., Vanda Pharmaceuticals, Inc. and PrimeGen Energy Corp., PGNE.PK

Dr. Stock Pick — Tue, 13 Oct 2009 00:42:37 +0000

Dr Stock Pick HOT News & Alerts! _________________________________________ FREE Daily Stock Alerts From DrStockPick.com _________________________________________ DrStockPick.com Watch List! My Picks for Tuesday October 13, 2009, are: ************************************************************** VASC, Vascular Solutions Inc. VASC is an innovative medical device company that focuses on developing unique clinical solutions for coronary and peripheral vascular procedures. The company’s product line consists of five major categories: hemostat (blood clotting) [...]

How Russia Learned to Love the (Iranian) Bomb

Robert Amsterdam — Mon, 12 Oct 2009 20:28:17 +0000

Out of the many, many interesting quotes we got from Vice President Joe Biden during his famously candid Wall Street Journal interview (which sounded like it was done in a cocktail lounge), was the following appraisal of the United States...

DrStockPick.com Stock Report! 10/12/09, IFLO, PGI, BGCP, CAG, HERO, SRCL

Dr. Stock Pick — Mon, 12 Oct 2009 15:51:02 +0000

Dr Stock Pick HOT News & Alerts! _______________________________________ FREE Daily Stock Alerts From DrStockPick.com _______________________________________ Monday October 12, 2009 DrStockPick.com Stock Report! ************************************************************** Levi & Korsinsky is investigating the Board of Directors of I-Flow Corp. (NasdaqGM: IFLO) for possible breaches of fiduciary duty and other violations of state law in connection with their attempt to sell the Company to [...]

Local Elections, National Complaints

Robert Amsterdam — Mon, 12 Oct 2009 13:43:03 +0000

Yesterday Russia went through another one of its time-honored traditions of organized elections under sovereign democracy, and as may well be expected, United Russia swept 76 of 83 regions - helped no doubt by the strictly controlled lack of competition...

RA’s Daily Russian News Blast – October 12, 2009

Robert Amsterdam — Mon, 12 Oct 2009 08:20:56 +0000

TODAY: United Russia sweep polls at regional elections; accusation of vote-rigging fly. Mitvol receives unusual delivery. Medvedev had no time for Yushchenko at CIS summit; positive on Obama's peace prize; Ecuador looking for weapons deals?; Russia bids to host World...

Reforms and Military Defeat

Robert Amsterdam — Fri, 09 Oct 2009 14:37:17 +0000

While my editor was busily working away yesterday, Ariel Cohen had an opinion piece run in the New York Times. Upon seeing the headline and lede, I was worried that we were going to see yet another one of those...

Remembering Politkovskaya + Twitter Campaign

Robert Amsterdam — Wed, 07 Oct 2009 14:37:21 +0000

Memorial, fresh on the heels of an insulting lawsuit from Chechen leader Ramzan Kadryrov, holds a rally to commemorate slain journalist Anna Politkovskaya today:Hundreds of people are rallying in Moscow on the third anniversary of the killing of journalist Anna...

RA’s Daily Russian News Blast – October 7, 2009

Robert Amsterdam — Wed, 07 Oct 2009 07:45:41 +0000

TODAY: Third anniversary of the killing of Anna Politkovskaya; Kadyrov wins his lawsuit against Memorial, launches another. Gay marriage bid rejected; critical posters displayed around Moscow. Medvedev gets his new speech writer; no independence recognition trade-off with Turkey; Russia...

RA’s Daily Russian News Blast – October 6, 2009

Robert Amsterdam — Tue, 06 Oct 2009 08:02:25 +0000

TODAY: Iran uranium plan waiting to be concluded; Russia backs Serbia on Kosovo; Lavrov exit denied; Ingushetian cabinet out. Ex-US Yukos unit to launch mammoth lawsuit; picketed journalist gets unlikely defender; UN says Russia should improve immigration policies; grave...

RA’s Daily Russian News Blast – October 5, 2009

Robert Amsterdam — Mon, 05 Oct 2009 07:41:45 +0000

TODAY: Lavrov keeps eagle eye on Georgia; Netanyahu's fears about Russian rogue scientists; Chubais takes the fall for hydropower plant disaster. Litvinenko widow despairs over apparent British moves towards rapprochement. Luzhkov-Baturina to take Nemtsov to court. UN report pessimistic on...

Grigory Pasko: The Sutyagin Book Launch

Robert Amsterdam — Sat, 03 Oct 2009 19:50:07 +0000

Recently at the House of Journalists in Moscow a book launch event was held by Igor Sutyagin - who is well known not only as a fellow of the USA and Canada Institute, but also as one of Russia's...

Russia’s Mussolini-like State Corporatism

Robert Amsterdam — Sat, 03 Oct 2009 17:44:02 +0000

Paul Goble has a good report summarizing an argument from Vadim Dubnov published in Gazeta.ru about Russia's business of politics - how having so many officials with multi-million dollar business interests creates, well, conflicts of interest, to put it lightly....

“Dizzy with praise to Stalin”

Robert Amsterdam — Sat, 03 Oct 2009 15:59:41 +0000

Finrosforum has translated and posted the opinion article/open letter by the dissident journalist Alexander Podrabinek, which eventually prompted death threats and harassment by the Nashi, driving him into hiding.One does not need to blame the owners of the café; their...

RA’s Daily Russian News Blast – October 2, 2009

Robert Amsterdam — Fri, 02 Oct 2009 08:02:13 +0000

TODAY: Russia keeps its voting rights in Council of Europe; Lavrov says Russia wants unbiased discussions about human rights; French Foreign Minister argues Russia flouting ceasefire; Israeli diplomat makes swift exit; UK Foreign Secretary visit to ease tensions?; Scientology...

Today in Russian Business – October 1, 2009

Robert Amsterdam — Thu, 01 Oct 2009 08:11:27 +0000

According to Bloomberg, Russia intends to pay off the last of its Soviet-era $1.2 billion debt this year to ease the fears of potential investors. Ria-Novosti reports that the World Bank has suggested that Russia's GDP will reach pre-crisis levels...

RA’s Daily Russian News Blast – October 1, 2009

Robert Amsterdam — Thu, 01 Oct 2009 07:22:53 +0000

TODAY: EU Russia-Georgia report out! Tilted towards blame on Georgia; Russia claims vindication on who started it issue; denies report's accusations of Moscow violating international laws; PR machines crank up on both sides. PACE to vote today on rights;...

RA’s Daily Russian News Blast – September 30, 2009

Robert Amsterdam — Wed, 30 Sep 2009 08:34:01 +0000

TODAY: Georgia-Russia tensions simmer in advance of EU report; Council of Europe hullabaloo. Russia edgy on Washington's new defense scheme; Obama forward looking; Kremlin does not feel Iran missiles justify sanctions. Journalist in hiding over anti-Soviet article; no joy...

Russia Will Disappoint on Iran

Robert Amsterdam — Fri, 25 Sep 2009 21:19:18 +0000

I think that Rob Coalson at RFE/RL makes some good points here. The missile shield was a non-functional fiasco, but the diplomatic missteps which have so severely damaged relations with Eastern Europe are certainly not worth the expected help the...

Grigory Pasko: Run-of-the-mill lawlessness

Robert Amsterdam — Fri, 25 Sep 2009 19:12:43 +0000

Run-of-the-mill lawlessness Grigory Pasko, journalistЕсли Вы хотите прочитать оригинал данной статьи на русском языке, нажмите сюда.There probably isn't any statistical data out there about what quantity of Chechens has been convicted by Russian courts over the past, say, ten...

Russia Losing a Generation to Heroin

Robert Amsterdam — Fri, 25 Sep 2009 14:47:07 +0000

Megan K. Stack has a very sad report in the Los Angeles Times today on the proliferation of heroin use in Russia, which has been dramatically increased from the booming narcotics industry coming out of Afghanistan - another thorn in...

Sex, Lies, and a Fake Videotape?

Robert Amsterdam — Fri, 25 Sep 2009 13:33:17 +0000

This story about a kompromat sex tape made of a U.S. diplomat in Russia is spreading like wildfire across the internets. Kyle Hatcher, a relatively young diplomat posted to the U.S. Embassy to liaise with religious groups in Russia, was...

Today in Russian Business – September 25, 2009

Robert Amsterdam — Fri, 25 Sep 2009 09:31:26 +0000

The Moscow Times suggests that Russia will be consigned to the sidelines in today's G20 meeting to discuss creating a global financial architecture, as, for all of its riches, the country lags behind in industrial development. With all of the...

Arvo Pärt Symphony to Khodorkovsky Debuts Tonight in Toronto

Robert Amsterdam — Thu, 24 Sep 2009 20:04:20 +0000

In the past we have blogged about the famed Estonian composer Arvo Pärt's dedication of his latest Symphony #4 to Mikhail Khodorkovsky. Tonight at 8PM at the Toronto Centre for the Arts this work will debut. For my fellow Canadian...

The Return of “Prikhvatizatsiya”

Robert Amsterdam — Thu, 24 Sep 2009 12:38:50 +0000

The Financial Times Lex Column comments on the recent announcement by Igor Shuvalov that Russia will undergo a new wave of privatizations of state shares in companies such as Rosneft in order to lure reluctant investors back. Officials talk, too,...

Today in Russian Business – September 24, 2009

Robert Amsterdam — Thu, 24 Sep 2009 08:42:27 +0000

The FT reports that Russia and China have warned that the impact of the financial crisis is far from over. The cabinet has approved a 2010 draft budget, with major cuts on managing government ministries, which may see officials forced...

RA’s Daily Russian News Blast – September 24, 2009

Robert Amsterdam — Thu, 24 Sep 2009 07:53:58 +0000

TODAY: Russia relenting on Iran sanctions; calls missile defense decision constructive; arms reductions talks are apparently progressing apace; Medvedev urges for Middle East arms cuts too. Island cooperation for Japan and Russia; Georgia undecided on Guantanamo guests; Poland - officially...

Dmitry Medvedev before the UNGA

Robert Amsterdam — Wed, 23 Sep 2009 13:19:48 +0000

What on earth do you think we'll hear from the Russians this year? A defensive and hostile discourse on the evils of the United States and the West, or a slightly more conciliatory tone about Russia's long deserved global leadership? ...

Autocratic Competition

Robert Amsterdam — Wed, 23 Sep 2009 13:06:39 +0000

Contrary to rumor, competitive politics do exist inside Russia's government - but only among those already in power. In taking a look at the contradicting and competing statements about future plans for the 2012 elections from both Vladimir Putin and...

RA’s Daily Russian News Blast – September 23, 2009

Robert Amsterdam — Wed, 23 Sep 2009 08:42:19 +0000

TODAY: EU chief has faith that Russia will not stand in the way of sanctions against Iran; US reproaches Russia on human rights; hope for WTO bid? Yushchenko suggests NATO bid would receive popular backing; ethnic haters charged; new...

RA’s Daily Russian News Blast – September 22, 2009

Robert Amsterdam — Tue, 22 Sep 2009 08:44:04 +0000

TODAY: Chief of staff denies decisions on Kaliningrad plan; Churkin criticizes US 'cold war attitude'; arms reduction talks not progressing as smoothly as they may appear. Israel maintains choice in Iran; Russia suggests onus on NATO to improve ties;...

RA’s Daily Russian News Blast – September 21, 2009

Robert Amsterdam — Mon, 21 Sep 2009 07:57:56 +0000

TODAY: Obama firm on reasons for missile defense decision; Medvedev and Putin seem to take it as a positive sign; Putin wishes to see trade the next barrier broken; Russia will abandon Kaliningrad missile plans. Pressure mounting regarding Iran situation;...

How Not to Begin an Interview

Robert Amsterdam — Sun, 20 Sep 2009 11:12:31 +0000

A lesson in media relations from Vladimir Putin:The world's economic crisis does not seem to have been unkind to you, Vladimir Putin notes as we sit down to a lunch that begins with calf's tail in aspic. "You all look...

Grigory Pasko: A Week in Almaty, Part 3

Robert Amsterdam — Sun, 20 Sep 2009 10:33:43 +0000

In the famous film Borat, Kazakhstan is shown, to put it mildly, as a strange state. However, the government of Kazakhstan, extremely irritated by the film at the beginning, now, as they are reporting, has replaced wrath with kindness...

Energy Blast – September 18, 2009

Robert Amsterdam — Fri, 18 Sep 2009 09:47:24 +0000

The New York Times suggests that antagonism regarding issues of sovereignty over Arctic waters has had a deleterious effect on the RUSALCA Arctic Sea mission. Bloomberg reports that BG Group will seek to recover at least $700 million in export...

RA’s Daily Russian News Blast – September 18, 2009

Robert Amsterdam — Fri, 18 Sep 2009 08:37:22 +0000

TODAY: US missile defense in Eastern Europe plans officially scrapped in favor of 'more efficient' new program. A matter of concession or conviction on Obama's part; mixed reaction from former would-be host countries fearful of Russian dominance; is the...

RA in Moscow Times: Clan Politics of Russia, Venezuela, and Iran

Robert Amsterdam — Thu, 17 Sep 2009 05:49:49 +0000

Robert Amsterdam has an opinion article published in The Moscow Times today:The recent visits to Moscow and Tehran by Hugo Chavez raise a number of concerns about the deepening relations between Russia, Iran and Venezuela. The motivation behind the Russia-Iran-Venezuela...

The Ongoing Sibir Saga

Robert Amsterdam — Wed, 16 Sep 2009 18:55:01 +0000

Coming to this a few days late - the Wall Street Journal published a lengthy account last week of Sibir Energy and its beleaguered top shareholder, former real estate magnate Chalva Tchigirinsky. There's not a lot new here to anyone...

Energy Blast – September 16, 2009

Robert Amsterdam — Wed, 16 Sep 2009 09:24:39 +0000

Natural Resources Deputy Minister Sergei Donskoi has said that Russia would welcome foreign companies looking to explore the country's oil and gas reserves as domestic firms lack the 'strength and money' to carry out these operations themselves. State-run electricity companies...

RA’s Daily Russian News Blast – September 16, 2009

Robert Amsterdam — Wed, 16 Sep 2009 08:18:02 +0000

TODAY: Medvedev denounces corruption as main problem in Russia, argues business mentality needs transformation, does not rule out standing at 2012 elections and hints at a possible U-turn on Iran. NATO chief calls for closer cooperation with Russia; Medvedev suggests...

Democracy Lessons in Yaroslavl

Robert Amsterdam — Tue, 15 Sep 2009 13:07:34 +0000

Following the publishing of President Dmitry Medvedev's extended liberal thought piece, which at least one commentator said may as well have been penned by Mikhail Khodorkovsky, the Kremlin convened a conference yesterday in Yaroslavl entitled "The Modern State and Global...

Mechel’s New Production Line – Analyst Blog

Zacks Market Commentaries — Mon, 14 Sep 2009 18:00:49 +0000

One of Russia’s leading mining and metal companies, Mechel OAO (MTL) is starting a new production line for cold-deformed reinforcement wire at its Beloretsk Metallurgical plant (BMP) subsidiary. Total investment in the project exceeded 55 million rubles ($1.79 million).

Mechel intends to increase the share of high-margin products manufactured under its Steel division. The company will process the cold-deformed reinforcement wire at its production unit in Moscow into quality wire rod highly demanded in construction. Mechel foresees an increase in demand for this new class of steel products. The company has already received an order for reinforcing wire of BMP production.

Due to low carbon content and mechanical strengthening, the cold-deformed reinforcement wire has several advantages compared to hot-rolled reinforcement wire such as improved welding characteristics, increased toughness and durability, and lack of scale. Additionally, cold-deformed reinforcement wire has higher design resistance to expansion and compression allowing reduction of its expenditure at 10% to 15%.

Demand for steel in Russia is expected to be high in the coming years. Mechel and its subsidiaries have implemented a $5.2 billion investment program for 2008–2012, focusing on the development of its Mining and Steel businesses. About $3 billion would go to the Mining business, $2.2 billion to the Steel business, and $42 million to energy projects. Of this, $1.3 billion will be invested in the development of the Chelyabinsk metallurgical plant (Mechel’s primary steel production facility) until 2011.

The investments should increase total steel capacity by 35% to 6.5 million tons, besides cutting costs through a complete changeover to concasting. Chelyabinsk will increase its flat stainless sheet production by seven times to 300,000 tons and expand its range of construction and engineering steel. As a result, steel production should rise 12% and rolled products output should grow 26%.

Mechel is looking to invest $1.2 billion in the Mining segment. Part of the spending will be used to increase coal production at Southern Kuzbass by 47% to 21 million tons by 2011. Mechel recently obtained controlling stakes in the coal companies Elgaugol and Yakutugol (68.86% and 100%, respectively), paying $2.34 billion. The companies produce coal in the East Siberian region of Yakutia and had been the largest remaining standalone coal producers in Russia prior to their acquisition by Mechel. Their output is mainly high quality coking coal. Yakutugol produces 10 million tons of coal per year, most of which it has been selling to customers in Japan and Korea. The company plans to increase this output to 15 million tons and redirect it to the domestic market.

We maintain our Neutral recommendation on the stock.

Read the full analyst report on "MTL"
Zacks Investment Research

Viktor Yushchenko Winding Down

Robert Amsterdam — Mon, 14 Sep 2009 14:33:05 +0000

Things are looking pretty bad for the Ukrainian President Viktor Yushchenko. Following Dmitry Medvedev's direct attack on his candidacy, Russia has successfully made itself indispensable in this election ... it seems they have learned from the last time. These comments...

CLWR Clearwire Begins Global Roaming Collaboration with WiMAX Operators

Stock-PR — Mon, 14 Sep 2009 12:09:05 +0000

Clearwire Begins Global Roaming Collaboration with WiMAX Operators Memorandum of Understanding Lays Foundation for Global Roaming Capabilities with UQ Communications of Japan and Yota of Russia Clearwire Communications, LLC, an operating subsidiary of Clearwire Corporation (NASDAQ:CLWR), announced that it has signed a memorandum of understanding (MOU) with WiMAX operators UQ Communications of Japan (UQ) and Yota of [...]

RA’s Daily Russian News Blast – September 14, 2009

Robert Amsterdam — Mon, 14 Sep 2009 08:45:19 +0000

TODAY: Putin looming over Presidency - 2012 return?; Chavez to have missiles and $2 billion credit line; Senator refused visa to Canada. Crackdown on alcohol begins with big bottles; human rights group faces shutdown on disputed grounds. Toy shop menaced;...

Hugo Chávezs Pattern Recognition

Robert Amsterdam — Fri, 11 Sep 2009 19:55:13 +0000

Venezuelan President Hugo Chávez is known for his erratic behavior, but his latest move to extend official recognition to Georgia's separatist regions of South Ossetia and Abkhazia during his visit to Moscow is a bit of a head-scratcher. In...

Competing Conspiracy Theories

Robert Amsterdam — Thu, 10 Sep 2009 13:04:17 +0000

So when Scott Anderson wrote his investigative article for GQ on the alleged government frame up and subsequent cover up of the 1999 Moscow apartment bombings, we were taken back to all the gritty details from Alexander Litvinenko's book, Mikhail...

Rudloff the Rude Boy

Robert Amsterdam — Wed, 09 Sep 2009 22:11:46 +0000

Last night I read these comments made by the Western banker Hans-Jörg Rudloff, the Chairman of Barclay's Capital and a board member of Rosneft. Most of the day, at least when I wasn't fixing my crashing computer, I was digging...

Energy Blast – September 9, 2009

Robert Amsterdam — Wed, 09 Sep 2009 09:15:01 +0000

Russia's refusal to upgrade gas contracts with Ukraine jeopardizes gas transit to Europe, says Bogdan Sokolovsky, the representative of the Ukrainian president on international aspects of energy security. The Ukrainian economics minister has reportedly assured Moscow that it will stick...