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Ghost
13-04-2005, 13:43
I saw this on Yahoo! news. And before you get started, I don't follow the publication the author writes for. I just thought it was an "interesting" read.

Thoughts?

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Oil booms, but investors flee Russia

Kremlin battle between proponents of a free-market model and those of a state-run economic vision is scaring off investors.

By Fred Weir, Correspondent of The Christian Science Monitor

MOSCOW - The price of Russia's main export, oil, is hovering at record highs. The government is currently pocketing nearly $20 on every barrel produced.

So why are foreign investors running for the exits, and the country's economy suddenly slowing?

A high-stakes battle for the direction of the Russian economy is creating new uncertainty, prompting investors and others to pull back. On the one side are Russian liberals, who favor rapid market reform and merging with the world economy. On the other are the siloviki, ex-security men who want to build a state-guided economy.

"This struggle between siloviki and liberals is starting to pull down our economy," says Alexei Mukhin, director of the Center for Political Information, an independent Moscow think tank. "The Kremlin really fears becoming isolated and losing control."

The Kremlin blames the warring Russian bureaucratic clans for smothering growth and fueling social discontent, and has issued an urgent - almost apocalyptic - appeal for all to unite behind President Vladimir Putin or face a looming crisis.

"Unless we are able to consolidate our elites, Russia as a single state may disappear," Kremlin chief of staff Dmitri Medvedev said in an unusually blunt interview last week in the business magazine Expert. "Whole empires have been wiped off the face of the earth when their elites lost their unity and engaged in deadly battles.... The breakup of the Soviet Union will look like child's play compared to a government collapse in modern Russia."

For the past year, the Kremlin faction of siloviki, a term derived from the Russian word meaning "force," have held the upper hand. Critics say the economic damage of their heavy-handed interventionism is plain to see. Gross domestic product rose at an annualized rate of 4.4 percent in the first two months of this year, down from 7.1 percent in 2004.

According to Russia's Central Bank, capital flight quadrupled last year as worried investors shoveled their assets offshore. Net capital outflow jumped from $1.9 billion in 2003 to $9.4 billion.

A recent report by the World Bank fingered the Kremlin's antibusiness policies, particularly last year's effective renationalization of Russia's most profitable private company, the oil giant Yukos. "The protracted Yukos affair has been the center of attention, but many other companies have also apparently experienced increased harassment," the report stated.

Unexpected bills for "back taxes" have been presented to companies such as telecommunications giant Vimpelcom, while some foreign firms, including BP-TNK, a 50-50 British-Russian joint oil venture, have been barred from bidding on new natural-resource exploration licenses.

"This is the only country in the world where the state sector is growing," wrote former Kremlin economic adviser Alexander Livshits in the daily Izvestia last week. "Last year, the capitalization of state companies grew by 70 percent. No matter what else happens in the economy, the state always seems to win."

In what could signal a change of course, Mr. Putin met with business leaders last month to pledge that the seizure of Yukos would be the last episode of its kind. To bolster confidence, he offered to reduce the statute of limitations on prosecuting illicit privatization deals to three years from 10, a move that would effectively legitimize most property acquired during the 1990s. He also promised to rein in Russia's tax collectors, who've been the siloviki's main instrument. "It is well known that businessmen have a lot of well-grounded grievances against the tax authorities," Putin conceded.

But business leaders say there is less to Putin's olive branch than meets the eye, and they want to see more tangible evidence that the Kremlin's free-market wing is winning the war for control of economic policy. "We're in a downward spiral, and even such a signal emanating from the No. 1 man is not enough to restore confidence," says Igor Yurgins, an investment banker and vice president of the Russian Union of Industrialists and Entrepreneurs, the leading business-lobby group. "The harm was done. Also, the hunting dogs of law enforcement and tax collection are out. Once they've tasted blood, it's very hard to get them back on the leash."

The Kremlin's new outreach to private business does not extend to leniency for the top executives of Yukos, who are on trial for fraud, embezzlement, and tax evasion. The company's former security chief, Alexei Pichugin, who was charged with ordering a double contract killing, was handed a 20-year prison sentence on March 30. Prosecutors in the case of Yukos's founder Mikhail Khodorkovsky are demanding he be given the maximum sentence of 10 years hard labor. Monday, he made his final plea of innocence. "They have jailed me so I can't stop them looting Yukos," Mr. Khodorkovsky said in his closing statement. The judge is expected to announce the verdict on April 27.

"The Yukos prosecution is a pedagogical action, aimed at teaching Russian business who's the boss," says Mr. Mukhin. "The authorities know they have to destroy it to the very end, otherwise they'll look weak."

Underlying the looming crisis, critics argue, is the economy's long-term failure to generate a viable middle class - the bulwark of social stability in most developed countries - based on a rising tide of small and medium businesses. According to OPORA, a Russian business association, Russia has about 900,000 small companies - around the same number as a decade ago - which account for 12 percent of GDP. (In the US, small businesses account for about 50 percent of GDP.)

Even Putin, pointing to the gauntlet of bureaucratic abuse and punitive taxation small businesses in Russia must face, remarked late last monththat "anyone who registers a new firm should be awarded a medal for personal courage."

The Kremlin concern, experts say, is that rising poverty, social inequality, and public unrest - perhaps emulating the recent demonstrations of people-power by some of Russia's neighbors - could spark a crisis that the country's squabbling elites would be unable to manage. "After all those orange revolutions on the one hand, and steadily loss of government authority on the other, of course there's real apprehension in the Kremlin," says Yurgins.

Random
13-04-2005, 14:14
Well he is right the market is spooked by all these tax bills and continued negative press against business here in Russia.

The fact that investors have just cottoned on to the fact that they might have been a little ripped off in other sectors such as retail & restaurants still hampers the climate as well. Recently met a Singapore investor who was renting a space for a restaurant - he was paying treble what he should have but he had been advised by his Russian Partners that it was the best price for the spot. I met the partners and came away from the meeting feeling that should I point out to the nice man from Singapore he was getting ripped off - there might be ripping off of limbs. My view - if the Singapore guy is that dumb to pay - knock yourself out guys.

Its Russain Ecomic Forum in London - so the liberals are having a field day saying all sorts of things about the timing of the BP-TNK tax bill etc etc

Bottom line - When I started broking in this business I had no competitors now there are 9 companies doing it - the first Russian Company that opened it doors gave people free brokerage for a month thus killing any margins in the market and getting themselves a share of the market. When I flew out here to ask my clients hey what the heck ? We have been doing this for a year now - why now the sudden switch - the response I got then and you still get now - This is Russia and its for Russians.

That has always been my biggest motto here since - no matter how much I offer as a Johnny F - I aint Russian - soon as Investors get that message as well then they will understand Russia

As has always been the case here - Russian companies need investment not investors.

MoscowGooner
13-04-2005, 14:24
My simplistic opinion is that as long as Oil prices keep flying high, the country is pretty safe no matter how long the elite keep squabbling.

The real short term concern is the inevitable appreciation of the Rouble if they want keep the inflation under control. Again that is not much of a danger as they do not export anything competitive so to speak.

Oil Prices are set to stay high for the forseeble short/medium term future, being driven by a huge Chinese demand. And the Chinese economy is unlikely to slow down sharply unless its shaky banking system collapses, or the US forces is to unpeg the Yuan to the dollar.


And actually I do agree that this is simply the usal spin coming out of the Russia Economic Forum in London. Nothing new there..

preacher of hedonism
13-04-2005, 14:26
for a 1000 years that Russia existed it has always bee on the brink, and much closer to the brink at times. Things will sort out.
Random: well said

Ghost
13-04-2005, 14:42
If you call the status of the last 1000 years "living" then, by all means, carry on.

But if you want to compare the standard of living through the world to that of Russia, I would expect to see the standard of living increasing - for ALL (not just Moscow) - at a much higher rate than it is, given the amount of the "surplus" fund.

I knew this article would drag you out, Preacher.

Random
13-04-2005, 14:48
True the standard of living is creeping along ...

But there has to be a purge in corruption, which lets face facts people is still rife in this country. Luzzie baby has to go then Moscow will become the boom town it should be - clean roads - nice parks etc etc - rather than the squalid mess it has become. I prefered Moscow a few years ago with out all the hoardings and all the blue lit cars.

Russia is still crippled though by Paris Club debt which it inherited from USSR - if the terms of this were renegotiated then fine we may see some progress. But as long as Russia has money and wont let investors in Paris Club is gonna nix any deal.

Halyavshik
13-04-2005, 14:49
I think the siloviki are just scared of a another tulip revolution after the Ukrainian, Georgian and Kirghiz elections; a needless worry judging by the all new levels of apathy displayed by the general Russian populace.

Fred Wier's a pretty well-respected journalist, too.

Random
13-04-2005, 14:55
Thats cause its spring !!

People are always more uppity in the winter months - in the summer they all go to the Dacha - grow food etc etc chill out in general.

Come those nasty winter days - short daylight, frigging cold, little food and some buggers played with your pension - people start to get a little restless.

Why do you think we are geting May 2nd back as a holiday ?

Agree though they are worried that there might be an uprising here....

Last thing we need though is hundred of old people crowding about the Albion !!

Excuse me old crone I am on my way to the pub !!

Ghost
13-04-2005, 15:07
Originally posted by Random
Last thing we need though is hundred of old people crowding about the Albion !!
!

That's the way it is now!

Seriously, though. Getting rid of the mayor, corrupt piglet that he might be, will not change much. They'll just replace him with someone as corrupt.

Oh yeah, give the people more holidays, they'll shut up!

Halyavshik
13-04-2005, 15:22
As long as they pretend to pay us, we'll pretend to work.

Random
13-04-2005, 15:23
I hope we do get May 2nd off ! I already booked a holiday !!

:agree:

All joking aside - very soon he will go and then the layers of corruption that he has built will come tumbling down - the fact that city hall has so many fingers in so many pies is gonna upset somebody from St Pete soon enough. His wife - Sistema and all the house of cards will fall - Yippee !!

The reason I think this is, look at any state that is run by corruption when you lose the top man then fighting starts amonst the lower ranks as to who takes over ...

Ghost
13-04-2005, 15:31
Perhaps...

You know, I've thought about investing into a bar or club here in Moscow a number of times. The one thing holding me back is all those stories how a successful business is "stolen" legitimately by "business partners" that show up with FSB and the right papers that were forged by a paid judge. Hell, people on this forum have posted about losing businesses.

That's why I'd never personally do it. In regards to bigger size companies, there are a lot of US consumer products companies that would love to come to Russia but say "nope...risk is too great, not worth it." A consulting company in the states asked me to become part of setting them up here, until the companies themselves expressed that they weren't ready for Russia - or Russia wasn't ready for them.

-Ghost

marmite
13-04-2005, 15:40
Random
Luzhy's apparachiks are being relaced from a federal dept from march this year.
it's results (so far) are not good nor promising, the people who we knew we could get business done (for a reasonable price) have been moved sideways and down.
the new apparachiks in charge are military trained, and the corruption is unchanged and even more extreme

yankee@moscow
13-04-2005, 15:43
I love this quote........

"This is the only country in the world where the state sector is growing," wrote former Kremlin economic adviser Alexander Livshits in the daily Izvestia last week. "Last year, the capitalization of state companies grew by 70 percent. No matter what else happens in the economy, the state always seems to win."

I couldn't have said it better myself!

Random
13-04-2005, 15:43
Set up and lost a business here - got that badge already !

yankee@moscow
13-04-2005, 15:51
Originally posted by Random
Set up and lost a business here - got that badge already !

Does the stick pin go through the nipple to make you suffer for a while or do they just stick it right into your heart to get it over with quickly?

preacher of hedonism
13-04-2005, 15:51
Originally posted by Ghost
If you call the status of the last 1000 years "living" then, by all means, carry on.

But if you want to compare the standard of living through the world to that of Russia, I would expect to see the standard of living increasing - for ALL (not just Moscow) - at a much higher rate than it is, given the amount of the "surplus" fund.

I knew this article would drag you out, Preacher. In fact I called it "existing" :) Ghost, in this moment of time, the most important thing is keep the country in its present borders, prevent from falling apart. That implies, among other things, assuring that most people have decent living standards. Decent in the Russian sense of it - there is no point comparing them to western ones. This is being gradually done. If you had been here in 1990-1998, you would definitely see how life has improved now, and not just in Moscow.
Re: surplus. I believe the most stupid thing woud be to spend it all on hiking wages and pensions. Yes, maybe some part of it should go there, given the moral of thing of oil being the property of the people. But the wiser move (looks like it will implemented) would be to pay off debts and finance lowering taxes for businesses.
Hell, who needs to sell out the country to foreign corporations, when there is so much national capital that can be diverted to virtually any sphere of business given proper revenue ratios.

It did drag me out indeed:)

Random
13-04-2005, 15:53
Originally posted by yankee@moscow
Does the stick pin go through the nipple to make you suffer for a while or do they just stick it right into your heart to get it over with quickly?

Straight to the heart !!

:eek:

yankee@moscow
13-04-2005, 15:54
Originally posted by preacher of hedonism
In fact I called it "existing" :) Ghost, in this moment of time, the most important thing is keep the country in its present borders, prevent from falling apart. That implies, among other things, assuring that most people have decent living standards. Decent in the Russian sense of it - there is no point comparing them to western ones. This is being gradually done. If you had been here in 1990-1998, you would definitely see how life has improved now, and not just in Moscow.
Re: surplus. I believe the most stupid thing woud be to spend it all on hiking wages and pensions. Yes, maybe some part of it should go there, given the moral of thing of oil being the property of the people. But the wiser move (looks like it will implemented) would be to pay off debts and finance lowering taxes for businesses.
Hell, who needs to sell out the country to foreign corporations, when there is so much national capital that can be diverted to virtually any sphere of business given proper revenue ratios.

It did drag me out indeed:)

I'd say that every part of Russia except Moscow would prosper much more if the country was split into about 7 different countries. As it is, everything is funnelled through Moscow, even the money made 9 time zones away in Sakhalin. It's a crime!

preacher of hedonism
13-04-2005, 16:00
Another proof that we, Muscovites, are the smartest!

Patriot
13-04-2005, 16:01
Russia does not need foreign investment, particularly American investment, which is short term in nature.

Russia is not some lame European country. Its government is terrible but its people are great. Stronger and prouder than anywhere on earth.

Random
13-04-2005, 16:04
Originally posted by Patriot
Russia does not need foreign investment, particularly American investment, which is short term in nature.

Russia is not some lame European country. Its government is terrible but its people are great. Stronger and prouder than anywhere on earth.

Backs up what I said earlier !!

Thanks for that !!

Patriot
13-04-2005, 16:06
Agree Random. If you want some stangnant boring country go to Germany. If you want thrills and spills and the potential to make vast sums of money, come to Russia.

If you want to whinge, you're not being kept in the gulag.

yankee@moscow
13-04-2005, 16:10
Originally posted by Patriot
Russia does not need foreign investment, particularly American investment, which is short term in nature.

Russia is not some lame European country. Its government is terrible but its people are great. Stronger and prouder than anywhere on earth.

Then why can't they build a decent automobile without foreign investment? How can a country that builds some of the best fighter jets and rockets ever made still not figure out how to make a decent automobile, market it, and make a profit? My theory is that the military airplane industry and the military rocket industry was always competing against the finest that the world had and has to offer, but the automobile industry never had any competition until the fall of the Soviet Union. They were never set up to compete. Amazing what competition can do to an industry isn't it?

Patriot
13-04-2005, 16:13
Well, there is competition now. Russian cars are bad but they are improving. The reason they are so bad is there was never any political imperative for their improvement. Now there is a market one. We'll see.

The thing is Russia is hungry, the West is flabby and decandent.

DPG
13-04-2005, 16:19
Originally posted by yankee@moscow
Amazing what competition can do to an industry isn't it?

Not only an industry but even individual businesses. As they say "the best thing that can happen to a restaurant is that another restaurant opens next door".

It's only a matter of time before restaurants and shops (not to mention manufacturers) here start realising this and also start realising that, nowadays, if the product is bad or the service is poor, people will go next door or down the street (or indeed go to that importer) and there will be no state subsidies for them...

The only way is up!

Random
13-04-2005, 16:22
DPG that is true if it is just a restaurant ...ie if that is the restaurants prime function ...

A lot of restaurants here ..and I know this will be a bit of shocker for some of you ...the owners don't care money through the till from customers is added bonus ...according to the "books" the restaurant is making a profit, in some case a very fat profit.

DPG
13-04-2005, 16:25
Random - I agree and I know a couple of restaurants here just like that!

It does apply for most businesses though, in a free market where there is no state recompense for those that fail or underperform, or no cross-subsidy from integrated companies under one umbrella (which is frowned upon by competition commissions in other areas of the world)...

yankee@moscow
13-04-2005, 16:44
Originally posted by Patriot

The thing is Russia is hungry, the West is flabby and decandent.

Tell that to people in Ireland, Mexico and Brazil. Even more so, the entrepeneurs in the US, Britain and some other decadent fat western countries are some of the most aggressive businessmen on the face of the earth.

Patriot
13-04-2005, 16:47
Last time I looked Mexico and Brazil were emerging markets.

Ghost
13-04-2005, 16:52
Originally posted by Patriot
The thing is Russia is hungry, the West is flabby and decandent.

Agree wholeheartedly with the fact that Russia is hungry. But would argue with you until I'm blue in the face that the West is flabby and decadent.

I would challenge that US companies understand competition as well and/or better than any international company in the world. Of course, there are exceptions, but I'm saying the rule - not the exception. A company that is - for a moment - complacent in it's practices in the US is obliterated by it's competitors in the blink of an eye.

Here in Russia, companies that are complacent get protected by the government for as long as possible.

Would also disagree with your statement saying that "Russia does not need foreign investment, particularly American investment, which is short term in nature." This sounds like you're being a little too Cold War for logic here. American companies, like the one I work for, bring jobs, training for Russian managers and employees, revenues in the form of taxes and B2B partnerships, as well as provide needed products to a Russian population who wants them. I do not know many foreign companies "particularly American" that say "We're only here for the next couple of years!"

All of them want to be here forever. And Russian companies that do business in the US want the same.

Ghost
13-04-2005, 16:54
Originally posted by Patriot
Last time I looked Mexico and Brazil were emerging markets.

So is Russia!

Patriot
13-04-2005, 16:56
Steel tariffs in the US in flagrant violation of international trade rules? No protection of crap businesses there.

Foreign investment is fine. I just don't want people pretending Russia doesn't have enough money to finance its development. It plainly does. It also has the skills to develop the businesses. People here learn fast as it is often a matter of life and death.

Patriot
13-04-2005, 16:57
Originally posted by Ghost
So is Russia!

That guy was trying to classify Brazil and Mexico as the West. Economically they are not.

yankee@moscow
13-04-2005, 17:07
Originally posted by Patriot
That guy was trying to classify Brazil and Mexico as the West. Economically they are not.

I think you'd get some arguments from them. Brazil has one of the hottest economies in the world, and Mexico is part of NAFTA. The are in the "western" hemisphere. Just because they are not on an economic par with the USA does not mean that they aren't western. If you want to isolate the USA and other counries, then do it. Don't lump every other western country in with them.

Also, no one is saying that Russia doesn't have enough money to finance it's economy. That has zero to do with why Russia needs foreign investment. The USA loves foreign investment. Hell! We advertise for it and invite foreigners to invest in America. Why? It's fabulous for the economy, just like it is for the Russian economy. Do you know how many secondary businesses and jobs that one factory can bring to a community? The effect is exponential. It also helps domestic businesses competitively.

You need to quit looking at foreign investment as a threat or a crutch. It's one of the best things that can happen to any country with a free market economy. Wake up!

Ghost
13-04-2005, 17:08
Originally posted by Patriot
That guy was trying to classify Brazil and Mexico as the West. Economically they are not.

My mistake, agree completely.

Ghost
13-04-2005, 17:11
Originally posted by Patriot
Steel tariffs in the US in flagrant violation of international trade rules? No protection of crap businesses there.

Foreign investment is fine. I just don't want people pretending Russia doesn't have enough money to finance its development. It plainly does. It also has the skills to develop the businesses. People here learn fast as it is often a matter of life and death.

No one here is questioning that Russia does not have enough money to finance it's development. The article, and those of us in this thread, question whether that money will be used correctly for the right of the country, or whether it will be "appropriated" in various ways to go to...well, you know.

As for steel tariffs, EVERY country engages in protectionism from time to time. That's not what I'm talking about. I'm talking about simply blocking foreign companies from doing things without any given reason. I can give you a personal example of this with my company where it's just BS totally. And the ministry doing it has admitted it to me! Anyway, that's not the point of this thread.

jheisel
13-04-2005, 17:19
Originally posted by Patriot
Steel tariffs in the US in flagrant violation of international trade rules? No protection of crap businesses there.


...which is why Russian metals companies have bought floundering US metals companies, and now they can skirt these regulations.

Patriot
13-04-2005, 17:20
Yankee, a growing economy does not make a Western country.

BP bought a stolen business that only confirmed the oligarchs' thinking that there is no difference between their behaviour and Western business behaviour. You people hail that as good foreign investment. I say keep it for yourself.

Patriot
13-04-2005, 17:26
Originally posted by Ghost
No one here is questioning that Russia does not have enough money to finance it's development. The article, and those of us in this thread, question whether that money will be used correctly for the right of the country, or whether it will be "appropriated" in various ways to go to...well, you know.

As for steel tariffs, EVERY country engages in protectionism from time to time. That's not what I'm talking about. I'm talking about simply blocking foreign companies from doing things without any given reason. I can give you a personal example of this with my company where it's just BS totally. And the ministry doing it has admitted it to me! Anyway, that's not the point of this thread.

Sorry, steel tariffs were simple protection. Farm subsidies are the same.

As to bureaucrats defending local business for bribes. I am not defending that. But that sort of crap is why there is potentially a lot of money to be made here because it's not a simple thing to do business.

In terms of spending the money. Yes, there is a debate. No different to America letting the dollar go through the floor to try to stimulate growth or sending your deficit to the moon to pay for tax cuts.

Patriot
13-04-2005, 17:26
Originally posted by jheisel
...which is why Russian metals companies have bought floundering US metals companies, and now they can skirt these regulations.

What does that have to do with breaking trade rules to protect non-competitive businesses?

yankee@moscow
13-04-2005, 17:33
Originally posted by Patriot
Yankee, a growing economy does not make a Western country.

BP bought a stolen business that only confirmed the oligarchs' thinking that there is no difference between their behaviour and Western business behaviour. You people hail that as good foreign investment. I say keep it for yourself.

I've taken your advice. I don't invest here and neither do a lot of other people. Why? Because of exactly what happened to BP. They bought a stolen company, and you actually think they did it on purpose and that BP is the bad guy. I think you've shown us why. So maybe Toyota, RJ Reynolds, Ford, ENKA, GM, Intel, Wrigleys, Nescafe, and the rest of the non-Russian companies should just leave too? They add nothing to the Russian economy. You don't need or want them. You can do it all on your own.

BTW, western is defined as "in the west". If you are classifying businesses by "high powered traditionally industrial and entrepeneurial countries" then Mexico is not that. I agree. However, that would also include Japan, who is eastern but western by your definition. Are you trying to confuse me on purpose?:p

MoscowGooner
13-04-2005, 17:35
Originally posted by Patriot
What does that have to do with breaking trade rules to protect non-competitive businesses?

Patriot, Russia needs to join the WTO in order for your anti-protectionism speech to make sense. Russia has not been very keen on joining so far. The chinese did and now they are running the show. And so should Russia IMHO.

Having said that, u can defend isolationism and claim that Russians can sort it out all themselves on their own. They might well be able to. So far they have only enjoyed limited success in that matter.

Patriot
13-04-2005, 17:38
The companies you mentioned generally set up their own operations. BP cheaply (by global standards) bought a company that was ripped off and confirmed the view that Western business is similar to the oligarchs here. I don't think you quite understand the damage on the mentality here. I then read in the Western press that this is great for Russia.

I am not trying to confuse you. I was just using a general accepted term not a geographical one.

Patriot
13-04-2005, 17:40
Originally posted by MoscowGooner
Russia has not been very keen on joining so far.

You could have fooled me. It was not very interested in charging European rates for energy resources it has in abundance.

I do not advocate Russia's isolation. I don't like it being slandered by ignorance.

MoscowGooner
13-04-2005, 17:47
Originally posted by Patriot
You could have fooled me. It was not very interested in charging European rates for energy resources it has in abundance.

I do not advocate Russia's isolation. I don't like it being slandered by ignorance.


My point was, Russia could sue the US for its protectionist tarifs only if it joined the WTO. Otherwise it cant do much about that and ur speech doesnt make a lot of sense.

As for getting Gazprom to locally charge "Market rates" for gas and so forth, I dont see how the europeans can realistically enforce that on Russia (even in the event of joining WTO) as it is not part of an economic bloack (Say part of Europe or NAFTA for instance) and am sure there should be more than one way around that.

Patriot
13-04-2005, 17:50
Originally posted by MoscowGooner
My point was, Russia could sue the US for its protectionist tarifs only if it joined the WTO. Otherwise it cant do much about that and ur speech doesnt make a lot of sense.

As for getting Gazprom to locally charge "Market rates" for gas and so forth, I dont see how the europeans can realistically enforce that on Russia (even in the event of joining WTO) as it is not part of an economic bloack (Say part of Europe or NAFTA for instance) and am sure there should be more than one way around that.

The discussion was about protecting bad businesses.

The europeans tried to "neforce it" by blocking Russia's bid (they have relented). You tried to say Russia wasn't interested in joining the WTO and I told you that was wrong. What does not make sense?

Ghost
13-04-2005, 17:58
Originally posted by Patriot
In terms of spending the money. Yes, there is a debate. No different to America letting the dollar go through the floor to try to stimulate growth or sending your deficit to the moon to pay for tax cuts.

Yes, but there's no threat in the US of one of our "oligarchs" disappearing with half of a "surplus" fund.

And if you want to argue about letting the dollar go through the floor, that's JUST my game. I'm a FOREX guy. You claim that was the US's fault?

Patriot
13-04-2005, 18:05
There is no suggestion a Russian oligarch is going to run off with the stabilization fund either. I am not sure Ken Lay and the others are such shining examples of America's business ethic.

Russia has had 15 years and is coming out of a totally distorted situation and has never been very stable in all its history (don't laugh at that. America is protected by two oceans). It is amazing that I then read expatirates saying :oh your business is bad, oh your government is terrible, oh be more like us. oh we like the massive profits of your developing economy but are outraged at the risk associated with them."

Markets determine currencies not government. If your economy is crap your currency usually follows. Isn't that right?

MoscowGooner
13-04-2005, 18:06
Originally posted by Patriot
The europeans tried to "neforce it" by blocking Russia's bid (they have relented). You tried to say Russia wasn't interested in joining the WTO and I told you that was wrong.

Thing is Russia has hardly anything competitive on offer other than raw materials including Gas. Unless Russia opens that sector up to a certain extent, Europeans arent very interested in getting Russia in the WTO.



Originally posted by Patriot
What does not make sense?

Everyone country engages in protecting its ecomomy. The WTO is there to set up a levelled and fair playground for everyone to compete. Agreed, it is not perfect and its probably run by the US and by the Europeans to a lesser extent. But hey, thats life, US is the biggest economy and Europe is not far behind.

Protectionism is actually a good thing unless you agree to play fair and square with a group of other countries, in which case protectionism is evil.

Therefore it does not make sense, from a russian point of view, to talk about the US protectionism cause US is not supposed to accomodate Russian interests unless it gets into the WTO.

Hardly rocket sicence mate!

Patriot
13-04-2005, 18:10
Gooner, I was not complaining about US protection. I was using steel as an example of protecting bad business. It was actually even worse because it was based on elections at the time. Someone was talking about business and politics in Russia?

Ghost
13-04-2005, 18:21
Originally posted by Patriot
Markets determine currencies not government. If your economy is crap your currency usually follows. Isn't that right?

In general this is true, but not in the case of the USD. In this case it's merely a matter of diversification of dollars into Euro, Sterling, etc. It's countries not wanting to rely on fluctionations in the currency market affecting them so greatly. It's called balancing.

Got news for you, sport. The dollar may be at it's lowest versus other currencies in a while, but the US economy is one of the brightest shining stars out there - still is. When compared to other countries in Europe or Asia, yes even China and your beloved rodina, it's still very mature and attractive to investors. Dollar or not.

But it's becoming obvious to me that your responses in this thread are less and less about fact and more and more concerned with defending Russia (through attacking other countries). So I'll just withdraw my participation here lest this turn into the flame war I anticipate it will.

I should have expected as much with a pseudonym called "Patriot".

Oh, but lastly, while you can quote particular examples of bad behavior in business and in politics, you cannot claim (though you'll probably try) that it's to the extent it is here. No one is saying any country is free from corruption. In Russia, however, it's far, far greater a problem than the "decadent west".

Decadent...lol! What's next? Capitalist Pigs?

Patriot
13-04-2005, 18:27
Someone was just calling Brazil a shining star before.

Yes, I am defending Russia. There are serious problems here but it will pull through . No thanks to BP or protfolio investors in hedge funds outraged if massive returns come with risk.

Ghost
13-04-2005, 18:33
No one - including the author of the article - said Russia would not pull through.

Try defending less, and solving more.

Peace.

Patriot
13-04-2005, 18:34
Yes, Russia is corrupt. It has a clan mentality and is eastern.

But it has survived war, revolution, purge, more war, economic chaos. It has lost more intellectuals and men than most countries and it is still fighting.

I cited the examples back to you to note that for all America's self-importance it is not pure. That's all.

Ghost
13-04-2005, 18:52
And I agree - America is certainly not pure. I never claimed nor believe it was.

The EU, Russia, the US...even, ahem, Australia, could use some work.

Wouldn't you agree?

quincy
14-04-2005, 02:41
Originally posted by Patriot
Yes, Russia is corrupt. It has a clan mentality and is eastern.

But it has survived war, revolution, purge, more war, economic chaos. It has lost more intellectuals and men than most countries and it is still fighting.

I cited the examples back to you to note that for all America's self-importance it is not pure. That's all.

Patriot, while I respect Russia's ability to survive some of the deadliest wars in history (Napoleonic invasion, Anglo-French attack in 1854-55, World Wars I&II), I would say that the rulers of Russia failed to do their job properly and have not made the welfare of the Russian people their priority. Survival at the cost of immense suffering is not something to brag about

Russia being a mixture of the "east" (whatever that means) and Europe is actually Russia's strength. Don't make any apologies for it!

Russia does share many of the problems of countries like Brazil where there is a middle class that likes to assert its "superiority" over the poorer classes. Both countries get regular doses of bad publicity in the western media and the positive that exists is left out (journalists don't seem to see the positive, unless it is their bosses want to slant the stories to suit their politics, unlike expats who do)

Ghost, is it out of the question to start a bar/club business on your own? Do you HAVE to have a Russian partner (who might as you say show you the door one day with his FSB buddy?)

Patriot
14-04-2005, 07:45
Quincy, there is a Russian saying that goes something along the lines of "better a clever enemy than a stupid friend".

No-one was bragging about survival at the cost of immense suffering. It was used to put the current situation in its proper context. I don't think anyone in their right mind would count the Crimean War as among the deadliest in history.

Yes, Russia's rulers have been cruel. But it is often the case that the stick is necessary to get things done. But it is not only Russians, I think you could probably do with a crack around the head to knock some sense into you.

Ghost
14-04-2005, 08:43
Quincy, no, I don't have to start with a Russian business partner. But it won't matter. If I end up being successful, I'll lose the business to someone who "wants" it, or end up paying for an expensive roof either way.

Halyavshik
14-04-2005, 09:14
Patriot,

You keep saying that BP bought a 'stolen' company. Stolen from whom ? The State ? I'm not saying that people didn't make out like bandits (so to speak), but look at the facts: the state sold it to them. If you were offered Norilsk Nickel BY THE STATE for a mere pittance of its true value, would you, as an oligarch, turn it down, especially if it was offered under the guise of loans for shares ?

Tell you what, I wouldn't.

If Putin, Yeltsin, etc, etc were (are) so concerned about Yukos being purchased by Khodorkovsky for a fraction of it's price, why didn't they do anything back then ? What, they didn't know ? C'mon.

The Oligarchs could never have gotten their hands on anything if the State hadn't let 'em.

Patriot
14-04-2005, 09:51
TNK was taken in a rigged auction. As I said the government here is terrible and I am not defending the state.

But, when a multinational buys an obviously stolen company cheaply (by international standards the reserves were very cheap) it legitimises what took place in the 1990s. It moreover legitimises the view among Russian officials and business people that western companies and countries are as venal in their behaviour but have better PR. Perhaps though they are right.

As to Khodorkovsky and Putin. Do you think you live in Switzerland? Do you imagine there are nice simple transfers of power here? Yukos is not being destroyed by privatization revisions, no-one has been as that would implicate state officials, it is being destroyed with taxes.

Halyavshik
14-04-2005, 10:00
Originally posted by Patriot
TNK was taken in a rigged auction. As I said the government here is terrible and I am not defending the state.

But, when a multinational buys an obviously stolen company cheaply (by international standards the reserves were very cheap) it legitimises what took place in the 1990s. It moreover legitimises the view among Russian officials and business people that western companies and countries are as venal in their behaviour but have better PR. Perhaps though they are right.

As to Khodorkovsky and Putin. Do you think you live in Switzerland? Do you imagine there are nice simple transfers of power here? Yukos is not being destroyed by privatization revisions, no-one has been as that would implicate state officials, it is being destroyed with taxes.

You say that again. Stolen. The State sold 'em, oligarchs bought 'em. Absurd prices ? Yes. But who's fault is that.

What Yukos is being destroyed with is really irrelevant. The medium's not the point. The result is. And I think you're speaking far too early about what the State's intentions are in light of recent news of TNK-BP back tax claims of over a billion dollars. And that was just 2001. Let's see what *really* is behind Yukos, etc.

sparky
14-04-2005, 10:03
Originally posted by Patriot
TNK was taken in a rigged auction. As I said the government here is terrible and I am not defending the state.

But, when a multinational buys an obviously stolen company cheaply (by international standards the reserves were very cheap) it legitimises what took place in the 1990s. It moreover legitimises the view among Russian officials and business people that western companies and countries are as venal in their behaviour but have better PR. Perhaps though they are right.

As to Khodorkovsky and Putin. Do you think you live in Switzerland? Do you imagine there are nice simple transfers of power here? Yukos is not being destroyed by privatization revisions, no-one has been as that would implicate state officials, it is being destroyed with taxes.

In a free market economy business has to operate in the best interest of their shareholders. In this case BP invested in a company that was legally bought, according to Russian Law. I really think you are missing the point about foreign investment.

If Russia wants to participate in a global market then it has to play by the rules of the club, and that involves a certain level of free trade, foreign investment and not stealing investor’s money. If Russia thinks it can solve its economic problem with an isolationist policy and growing only the domestic market it will always be in the current situation.

MoscowGooner
14-04-2005, 10:07
Originally posted by Ghost
If I end up being successful,

Ghost, if you end up being successful enough, you'll recoup your initial investment relatively quickly. Then you might look for a russian partner to avoid the local bullying as any further income will be pure profits anyway.

But then obviously it all depends what sort of money we're talking about. If u can afford to sink a $100k investment without expecting any ROI over the first 6 months, go for it cause u can still even it out if things dont go very well (Unless it really goes pear shaped) . Now if we're talking $1million+, may the force be with you !

Ghost
14-04-2005, 10:15
Gooner, just not worth the effort and headache to do it here. I'm the GM of a large US FMCG company and just from my experience in THIS business, using the company's investment, I can see I would never want to do it from a personal level. Ever see the movie "Money Pit"?

Patriot
14-04-2005, 10:27
Originally posted by Halyavshik
[B]You say that again. Stolen. The State sold 'em, oligarchs bought 'em. B]

Was it a legislated sale? Oligarchs didn't buy them. They lent the state the state's money and when the state didn't repay its own money they received them.

TNK paid around 9% tax in 2001. The statutory rate is 2001. The Russian owners are liable not BP.

MoscowGooner
14-04-2005, 10:31
Originally posted by Ghost
Ever see the movie "Money Pit"?


Yep, seen that joint, hilarious :)

I would personally still go for it though if its money you can afford to lose.

Otherwise I get the picture, better off investing ur hard earned do$h somewhere safer.

Ever thought of the Baltic states?

Ghost
14-04-2005, 10:32
Don't have the connections for the Baltics unfortunately.

Patriot
14-04-2005, 10:47
Dave, TNKwasn't legaly bought and BP knows it. It was desperate for reserves and took a gamble and in doing so did enormous damage here.

Who stole investors' money? People who speculated on Yukos made a fortune and some are now losing it. It is a risky market and the returns are typically high so investors bet on that. No ned to cry later.

Halyavshik
14-04-2005, 10:52
Originally posted by Patriot
Was it a legislated sale? Oligarchs didn't buy them. They lent the state the state's money and when the state didn't repay its own money they received them.

TNK paid around 9% tax in 2001. The statutory rate is 2001. The Russian owners are liable not BP.

We can go into details, but at the end of the day, fact remains that the oligarchs received 'em from the state. Hard to call them stolen.

And don't get me wrong, Patriot-boy, I'm not saying that they didn't get Norilsk or Svyazinvest or whatever at better than rock-bottem bargains. It was a sham. But who's sham. And offered the same deal, I bet you'd find it hard to turn down. Until you can prove that those enterprises belonged to "the people", they weren't stolen.

Patriot
14-04-2005, 10:59
The Svyazinvest stake went for a very reasonable price for the time.

I would like to think that I would not be in a position of filling my pocket bank with ministry money and then lending it to the same government for assets. I think I would be ashamed.

Those privatizations and the West's legitimization of them were catastrophic. An absolute disaster. Do you know how hard people looked to the West for guidance on this? What do people make of an obvious scam with the national wealth upheld by civilised countries?

It is Russia's problem, of course. The society is in a very difficult period. But Western governments proved to be scum in supporting it and foreign investors like BP are as bad or worse.

There are enough immoral businesses here without needing the assistance of foreign ones.

Brezhnev L.I.
14-04-2005, 11:00
bloody capitalists

Halyavshik
14-04-2005, 11:11
Originally posted by Patriot
I would like to think that I would not be in a position of filling my pocket bank with ministry money and then lending it to the same government for assets. I think I would be ashamed.

Those privatizations and the West's legitimization of them were catastrophic. An absolute disaster. Do you know how hard people looked to the West for guidance on this? What do people make of an obvious scam with the national wealth upheld by civilised countries?

I dunno, maybe we're getting pedantic here, but if the state comes to me with this scheme that I know will result in me filling my pockets, that's their fault not mine. I see no reason, as an oligarch, to be ashamed.

As for legitimizing them, I agree. No one should ever have pointed to any of the auctions as examples of legitimate free market activity. And it's easy to point to Western guidance as the fall guy, but at the end of the day, other than a few guys like Andrei Shleffer or whatever that dude's name from the Harvard institute was, it was the oligarch's that ultimately benefitted, and the only people to blame for that was the state itself.

In general, it sounds like you're playing a little bit of devil's advocate in advocating no need for Western investment if you cite TNK as an example.

Patriot
14-04-2005, 11:19
No, why be ashamed. It's good to murder and scam people to build capital and then defraud the country when it is in a terrible situation.

It's good to read IMF, World Bank and American reports on the advancement in capitalism made through loans for shares.

TNK-BP is regularly held up as being groundbreaking.

Halyavshik
14-04-2005, 11:42
Originally posted by Patriot
No, why be ashamed. It's good to murder and scam people to build capital and then defraud the country when it is in a terrible situation.

Again, the people who defrauded the country were those in the state who organized the auctions, when the country was in a terrible situation.

quincy
14-04-2005, 11:50
So Ghost would you say that only the bigger investors have the means to deal with the problems you describe? As a smaller investor (say $100K) you would not be able to go high enough up the chain of authority to win their backing and ensure that you are left in peace?

The Russian public has a great appetite for diversity and a well-run business is sure to be successful

Patriot, "the Russian rulers were cruel but...". Sorry, no excuses for tyrants, and I am sure you would not be excusing them if you lived under them (as an ordinary member of the public)

As the the 1854-55 war, for history buffs here is a snippet from Mark Twain who went to Crimea a few years later.

Ruined Pompeii is in good condition compared to Sebastopol. Here, you may look in whatsoever direction you please, and your eye encounters scarcely any thing but ruin, ruin, ruin!--fragments of houses, crumbled walls, torn and ragged hills, devastation every where! It is as if a mighty earthquake had spent all its terrible forces upon this one little spot. For eighteen long months the storms of war beat upon the helpless town, and left it at last the saddest wreck that ever the sun has looked upon. Not one solitary house escaped unscathed--not one remained habitable, even.

http://www.literaturepage.com/read/twain-innocents-abroad-279.html

Ghost
14-04-2005, 12:05
No, I'm saying that with just me and my 100k, it's too much of a hassle to deal with all the crap I'd have to deal with as a small business owner here. As GM, I have a staff designed to deal with each particular aspect of the company, and all of their responsibilities include dealing with the local authorities in their capacity.

sparky
14-04-2005, 12:58
Originally posted by Patriot
Dave, TNKwasn't legaly bought and BP knows it. It was desperate for reserves and took a gamble and in doing so did enormous damage here.

Who stole investors' money? People who speculated on Yukos made a fortune and some are now losing it. It is a risky market and the returns are typically high so investors bet on that. No ned to cry later.

I think it is tenuous at best to link BP to your argument of western companies giving a bad example. It was over ten years after the ‘sale’ of TNK when BP joined as a strategic partner.

Patriot
14-04-2005, 13:49
Originally posted by quincy
Patriot, "the Russian rulers were cruel but...". Sorry, no excuses for tyrants, and I am sure you would not be excusing them if you lived under them (as an ordinary member of the public)

As the the 1854-55 war, for history buffs here is a snippet from Mark Twain who went to Crimea a few years later.

Ruined Pompeii is in good condition compared to Sebastopol. Here, you may look in whatsoever direction you please, and your eye encounters scarcely any thing but ruin, ruin, ruin!--fragments of houses, crumbled walls, torn and ragged hills, devastation every where! It is as if a mighty earthquake had spent all its terrible forces upon this one little spot. For eighteen long months the storms of war beat upon the helpless town, and left it at last the saddest wreck that ever the sun has looked upon. Not one solitary house escaped unscathed--not one remained habitable, even.

http://www.literaturepage.com/read/twain-innocents-abroad-279.html

In the other three wars you mention that was the scene across much of the European part of the country. That's why I made the comment.

Russia tends to need a strong leader because if the country divides against itself it tears itself to pieces. That's why historically it tends to rally around one person.

Patriot
14-04-2005, 13:52
Originally posted by Halyavshik
Again, the people who defrauded the country were those in the state who organized the auctions, when the country was in a terrible situation.

When was that in dispute? I am saying it was not done with any legislative basis and therefore illegal. Was breaking into the Watergate building legal because the president authorised it?

Patriot
14-04-2005, 13:54
Originally posted by ElectricDave
I think it is tenuous at best to link BP to your argument of western companies giving a bad example. It was over ten years after the ‘sale’ of TNK when BP joined as a strategic partner.

Yes, poor BP. Trying to make the best of the bad situation.

sparky
14-04-2005, 14:00
Are you really suggesting that no investors (in perpetuity) should be attracted to those companies sold in the early 1990s?

quincy
19-04-2005, 19:28
[From the Moscow Times]
World Bank: Russians Poorer Than Brazilians

By Maria Levitov
Staff Writer
Russia grew slightly wealthier, beating Romania but falling just short of Brazil, according to the World Bank's new World Economic Indicators annual report.

Gross per capita income rose by $480 to $2,610 in 2003 -- the last year for which comparative statistics were available -- propelling Russia into 97th place. Last year, the country ranked 99th among 208 countries and territories, according to the report.

While per capita income rose $100 more in 2003 than it did over the previous year, the report showed that Russia still had a long way to go to catch the United States' $37,870 per capita income or even the Czech Republic's $7,150.

Speaking at a meeting of the Group of Eight industrialized nations in Washington over the weekend, Finance Minister Alexei Kudrin said he was confident that Russia could close the gap on its G8 partners.

"Within the next couple of decades, Russia will outscore many countries in its GDP growth rates and will approach the G8's level of per capita GDP," Kudrin said, adding that this development depended on continued reforms, Kommersant newspaper reported Monday.

Ghost
21-04-2005, 14:06
Outscore GDP in relation to other countries? Sure. Outscore it on a per capita basis? Not for a very long time. The gap between rich and poor is just too large.