Russia investment

Photo: Maris Upenieks

Thousands of immigrants attracted by a construction boom is hardly front page news – but what if the latest El Dorado is an unrecognised and embargoed republic ? While the west focuses on Russia’s intervention in Ukraine, another disputed region under Russian dominance is experiencing a quiet boom in its construction sector. Despite widespread poverty among much of the local population and years of embargo – by the CIS until 2008 and by Georgia and many others now – the situation in Abkhazia is such that thousands of migrant workers are flocking to this de facto statelet. Read more

Russia’s surprise cut in its key interest rate to 15 per cent from 17 per cent on Friday was primarily a product of political pressure and may do more harm than good to Moscow’s twin aims of restraining inflation while softening the impact of an incipient recession, analysts said.

“The CBR’s (Central Bank of Russia) move will likely have quite a reverse effect on inflation,” said Vladimir Tikhomirov, chief economist at BCS Financial Group, a Russian investment bank. “The market is already increasing pressure on the rouble which, in turn, will transform into higher – rather than lower – inflationary expectations going forward.” Read more

By Vladimir Tikhomirov, BCS Financial Group

Russia’s central bank faces a dilemma at its monetary policy meeting on Friday. It stated when it hiked interest rates to 17 per cent last month – to their highest levels since 2003 – that this increase would be a temporary measure to defend the rouble. However, inflation stubbornly remains high, restricting the bank’s room to manoeuver.

Indeed, recent inflation data suggests that the new interest rate could stay for much longer. According to the official statistical agency, in December Russia’s consumer price index (CPI) jumped by 2.6 per cent month-on-month which is the highest level on record since the period of mid-1990s when inflation was running at unsustainable high double-digit rates. Read more

By Relte Stephen Schutte, Markit

In spite of what you might expect to be a “perfect storm” scenario for Russian stocks, inflows of investment capital into Exchange Traded Funds (ETFs) – investment funds traded on stock markets much as a stock would trade – have remained strong.

Net inflows into the 23 Russian tracking ETFs have proved buoyant in the last three months in spite of continued sanctions by the US and Europe and Moscow’s destabilising actions in Ukraine. Such inflows take 2014 net inflows into Russian ETFs past the $1bn mark (see chart), an extraordinary performance given the negative newsflow surrounding Russia. Read more

As Gazprom bullies Ukraine to settle its $3.5bn gas arrears, Russian domestic gas consumers are also running up multi-billion dollar debts. Ukraine is broke and Russian buyers, hit by the economic downturn, will struggle to pay up. Just as well then that Gazprom has finally clinched a $400bn gas contract with China which opens up a new potential market in the east from 2018.

Gazprom’s customers owed Rbs115.8bn ($3.35bn) for gas at the end of 2013, almost 40 per cent more than on December 31st 2012, Kirill Seleznev, director general of Mezhregiongaz, Gazprom’s gas distribution subsidiary, told reporters in Moscow this week. Read more

Sochi 2014 will be the most expensive Olympics in history, with the cost expected to top $50bn. But despite its huge budget, the winter event faces challenges, not least from the city’s sub-tropical climate and accusations of slave labour, as Charles Clover discovers.

Russia is famous for freezing winters but it appears to be losing its legendary ability to cope with the snow that blankets the country for at least five months in the year. An epic traffic jam that paralyzed traffic on a major highway between Moscow and St Petersburg for most of the weekend has drawn a stream of complaints from citizens and spurred the authorities to react. But with forecasters warning of more heavy snow ahead, officials will struggle to find a quick fix. Read more

Investors should look before they leap into investing in Russia, according to a report in Monday’s FTfm, but it is very unlikely that many will do so.

On the face of it, huge strides that have been made in the last year or so will make Russia a more friendly place for overseas investors. Read more

With Russian news often dominated by the woes of foreign investors like BP and Telenor, it is always nice to hear a positive story about the country’s investment climate. The announcement that Denmark’s AP Møller-Maersk is finally entering the Russian market fits the bill. Read more

Russia’s super-rich have spawned a literary genre, the oligarch thriller. Even John Le Carre’s latest, Our Kind of Traitor, features a Russian millionaire called Dima with a diamond-encrusted watch. But reality is so much more entertaining than fiction.

The case of Boris Berezovsky v Roman Abramovich, which opened in London’s High Court this week, has the classic elements – political intrigues, protection money, mansions in the south of France, and yachts the length of football pitches. It is not, however, exactly what Russia’s investment image needed, just as prime minister Vladimir Putin is trying to reassure investors ahead of his return as president next year. Read more

A Russian couple dancesHere we go again: yet another conflict has broken out between Mikhail Fridman’s Alfa Group and a foreign partner. This time it’s Alfa subsidiary A1 versus US venture capital firm Indigo Partners – and the battle is over Russian airline Avianova.

On the surface, the story seems to have all the trappings of every Alfa conflict of yore. (Think BP vs Alfa-Access-Renova, or Telenor versus Alfa-subsidiary Altimo.) But what do these stories actually say about the Russian investment climate? Read more