Newsweek writes about today’s world premiere of “Russian Visionaries. Into the Light,” a photography exhibit showcasing Russian opposition leaders at the 25CPW Gallery at 25 Central Park West in Manhattan. The show runs from Nov. 29 until Dec. 12 and is sponsored by the Institute of Modern Russia, a non-profit organization dedicated to advancing democracy, civil society and the rule of law.
With the Duma election just days away, “Russian Visionaries” introduces the nascent but growing Russian opposition movement to the American public in a stark and intimate way. Fifty-three austere black and white portraits taken by renowned photographer Kirill Nikitenko show the gripping gaze of prominent writers, actors, politicians and activists, brought together for this unique exhibit by Elena Khodorkovskaya, curator and former wife of political prisoner Mikhail Khodorkovsky.
LOCATION: 25CPW Gallery, 25 Central Park West, Manhattan, (212) 203-0250, www.25cpw.org
DATES: November 29 – December 12, 2011
HOURS: 11 a.m. – 8 p.m.
As reported in Bloomberg BusinessWeek, Russia is not likely to see an increase to its credit rating after entering the World Trade Organization later this winter due to “the country’s [poor] investment climate and institutional weaknesses,” according to two of the ratings agencies, Standard & Poor’s and Moody’s Investors Services.
Moody’s senior credit analyst Dietmar Hornung said that Russia must confront “institutional weaknesses” such as corruption and the lack of rule of law protections “to reap the full benefits from WTO entry.” The agencies cited the leading role still played by state monopolies in Russia as another reason to keep its debt rating at existing levels.
Currently, S&P rates Russia’s debt at BBB, the second-lowest investment-grade rate, which is on par with Peru, Bulgaria and Bahrain. Moody’s rates Russia at Baa1, their third-lowest investment grade level, which is one above Brazil and four below China.
You can read the full article here.
The L.A. Times reports from Moscow about the growing trend of young, entrepreneurial Russians looking for opportunities outside of the Motherland. According to the head of the national audit chamber, 1.25 million Russians have left the country in the what is being called the “Putin decade exodus.”
Experts believe “100,000 to 150,000 people now leave the country annually,” warning that “the exodus reached dangerous dimensions in the last three years,” writes L.A. Times reporter Sergei Loiko.
For many…economic strictures are the prime motivation. With inflation on the rise, and the country’s GDP stuck at an annual 3% growth rate the last three years — compared with 7% to 8% before the global economic crisis — Russians are feeling pinched.
According to Dmitry Oreshkin, a political analyst with the Institute of Geography, “The intellectual potential of the nation is being washed away, as the most mobile, intelligent and active are leaving.” While Levada Center head Lev Gudkov says, “It appears that the Kremlin couldn’t care less if the most talented, the most active Russians are emigrating, because their exodus lifts the social and political tension in the country and weakens the opposition.”
You can read the full article here.
Pavel Khodorkovsky, oldest son of jailed former Yukos CEO Mikhail Khodorkovsky, writes on CNN.com’s opinion page about the nascent but growing opposition movement in Russia and how his father is playing a role through his writings, encouraging the younger generation to take part.
Pavel says that despite Putin’s expected return to the presidency, most Russians would prefer living in a free, modern society instead of one marked by authoritarian rule:
The generation coming of age has ambitions to live better, build new businesses and advance their careers without paying a single ruble in bribes. They believe that change will come – in months or years and not decades – regardless of Putin’s return to power because most of Russian society wants to move forward.
You can read Pavel’s full piece here: http://bit.ly/uBUdLu.
Kudrin (left) and Medvedev in happier times
Russia’s former finance minister, Alexei Kudrin, has once again spoken out against President Medvedev’s budget policies, this time as Medvedev signed a bill increasing military wages and retirement allowances threefold, meaning federal spending on national defense will double over the next three years.
ITAR-TASS reports that when signing the budget bill, Medvedev said that the only people who opposed the increase in spending no longer work in the government – a not-so-veiled reference to Kudrin.
Kudrin, who was a highly respected Kremlin advisor and possible prime minister candidate, was fired by Medvedev for “insubordination” two days after Putin announced he would seek the presidency in 2012.
Also this weekend Kudrin warned of a possible new recession due to the growing crisis in the Euro zone and chastised Russia for its “Achilles heel” of overdependence on raw materials, especially oil.
While BP is battling TNK in a London court over the failed Rosneft deal, the companies find themselves co-defendants in New York case in which they are accused of stealing $1 billion in assets from the Calgary-based oil company Norex.
Ironically, newly discovered documents in the Norex case show that BP forged its alliance with TNK despite viewing it as “a ruthless and dishonest company that would stop at nothing to seize control of lucrative energy assets,” write Katie Benner and Alex Konrad in Fortune.
For more on the Norex lawsuit and how it demonstrates heightened investment risk in Russia, be sure to read this in-depth report from The Guardian, as well.
The cover story in the Russian Weekly New Times gives a well-constructed overview of how Prime Minister Vladimir Putin and his cronies have “divided up the country” to create an all-powerful “Russia, Inc.” that controls 10 to 15 percent of the nation’s annual GDP. Yevgeniya Albats and Anatoliy Yermolin write that the process begun after the arrest of Mikhail Khodorkovsky in 2003 has continued through a series of hostile takeovers, questionable auctions and security service intimidations, as huge industries have returned to state control.
Essentially, a vertically integrated holding company has been created in the country’s expanses – it has its own credit organizations that provide working capital, its own cash factories that pump oil and gas from the land, its own pipeline systems, its own transport of all possible kinds, its own structures that ensure security and weapons for it, its own communications, its own social amenities, its own services, including media services, and its own instruments of political control.
Putin’s strategy was to completely control the political process, remove Yeltsin-era elites from government and replace them with loyalists and audit to death the private companies created in the aftermath of the fall of Soviet Union.
With the Yeltsin-era business leaders out of the picture and his own cronies in place, wresting control of major industries – finance, energy, military and infrastructure – became possible.
The full article, in Russian, is available here.
Founder and chairman of CREF Pavel Ivlev presented the following letter to participants of the annual Russian-American Economic Forum held in New York City:
The 2011 Russian-American Economic Forum is a wonderful occasion for business leaders from both countries to explore new opportunities to work together. It is my hope that over the next few days you also find time to speak frankly about the challenges the businesses community faces when looking to invest in Russia.
With an educated workforce, vast natural resources and an expanding middle class, Russia seems well-positioned for sustainable economic growth. At the same time, political realities dictate that the opposite is just as likely to happen, if not more so, with the nation mired in the authoritarian rule of Vladimir Putin. That could mean another dozen years of instability, corruption and crony capitalism.
Over the last month former members of the Russian regime have openly acknowledged that Putin’s so-called “return” to power next year (as if he ever left) is a frightening prospect for those seeking to mitigate investment risk through the rule of law. The smallest small businessman and the greatest private equity titan remain concerned with his regime’s track record for stealing assets, commercially inspired arrests and midnight raids targeting even those companies once singled out as allies.
At the same time the price of entry remains high to entrepreneurs in a number of economic sectors, since such a large percentage of the economic output – from banking to transportation to natural resources – is vested in state-run monopolies that have no immediate plans to privatize. This centralized control allows Moscow to pick winners and losers and scares away the emerging class of young, educated Russians – half of whom are looking to emigrate, according to recent data from the Levada Center.
Investing in Russia requires more than just writing a check. It requires that corporations increase their odds of financial success by pressing the Putin regime to impose changes that will preserve and bolster their returns.
If the goal is to truly modernize Russia’s economy, opening it up to the West, Putin in his third term will need to understand that it’s in his best interest to strengthen the independence of Russia’s judicial system and protect intellectual property and contracts, end rampant bureaucratic corruption and put a stop to the use of Russia’s tax authorities and prosecutors to threaten Western investors and service providers. He will need to end the practice of confiscating private property, re-nationalizing natural resources and punishing political opponents and critics.
These are all basic steps that would make doing business there more tenable and that would improve your bottom line. I hope you have the opportunity to discuss these pressing issues in the coming days.
Blackstone Group's Steven Schwarzman
The executives of J.P. Morgan Chase, the Blackstone Group and Citigroup were in Russia last week advising President Dmitry Medvedev on how Moscow can improve its business and investment climate, writes the Wall Street Journal.
“Funds are actually scared to put money here. That’s the problem you must solve,” Blackstone’s Stephen Schwarzman told Medvedev.
Schwarzman counseled the Russian president to sell off state companies to private investors, while J.P. Morgan Chase CEO James Dimon recommended developing a “very strong set of legal rights” to lure investors, as the country’s notorious legal system and high levels of corruption often drive away investment.
You can read more here.
The New York Times is reporting that Georgian representatives have accepted a proposal that would clear Russia’s path to join the World Trade Organization in December.
Georgian Deputy Foreign Minister Sergi Kapanadze called Switzerland’s offer “the final, final, final compromise,” though Russian officials will wait a week to review and sign off on the parameters of the deal.
Georgia’s potential veto had been the last remaining obstacle to Russia’s accession to the WTO, as the former Soviet republic is still in a diplomatic row with Moscow over the status of Abkhazia and South Ossetia.