The ongoing conflict of the Russian government and the Russian business community raises the question of the economic course of the country.
Until yesterday Russia was ?quite a safe country?in the opinion of the world community. Having read the recent article in the New York Times by Tavernisi, one could think that Russia ?nowadays is one of the safest places for investments among emerging markets". High petroleum prices which provided companies with stable income have made Russia the leader among competitors for foreign investments. Finally the Russian borrowers managed to restore trust in their creditability after the financial crisis and the default of 1998.
What are the reasons, which force foreign investors to sell Russian securities today, despite of high oil prices and a growing economy?
The new strategic program of the Russian president aims at doubling the gross national product until 2010. This goal goes together with the government?s intentions to interfere in the national economy which is obviously very contradicting to liberal principles. Authorities should participate in economic life not through direct control, but through the creation of favorable conditions for business development and economic growth. But today, the main problem for the president is to save the favourable investment climate.
The position of large private business has rapidly changed since Putin came to power. He took control over television chancels and agreed with the oligarchs that if they stay out of politics, the murky privatization deals of the 90?s will not be revisited. However, some people are dissatisfied that the oligarchs make a fortune out of the exploration of Russia's natural resources. Their involvement in politics, if at all, should be in line with the Kremlin. Therefore, the economic freedom of business has become more restricted and is today at mercy of the groups in power.
Recent events concerning YUKOS, perfectly illustrate what we are talking about. Khodorkovsky, the head of Yukos, openly proclaimed his business interests which put him in direct opposition to the interests of Putin?s administration, which wants to keep companies under the influence of the government. But for Khodorkovsky, the development of his company comes first, ahead of national interest. The sponsoring of political parties, which are opposed to the Kremlin, was finally too much and the security agencies fought back.
The conflict around Yukos has dispelled illusions of the world community about the stable investment climate in Russia.
The sale of Russian assets proceeds on securities markets. Everything is going down ? shares of Yukos itself and that of other oil companies, the Russian Eurobonds as well as ruble bonds. Russian corporate bonds started to fall during the last week, first of all because of the deterioration of an advanced debt market in conjuncture with the strengthening of the dollar. However, the ?Yukos factor? played its role here too. Traders say that the falling of the prices for bonds of the Russian emitters once again illustrates the fear of investors about political risks in Russia and authorities haven not done a lot to counterbalance these fears.
The sale-out has intensified after the announcement about forthcoming checks of Yukos from the Ministry of Taxes and Tax Collection, and also comments of Michael Khodorkovsky, who after returning from USA declared that the affairs connected to his company are concerning other large corporations, and by the end of this year the damage will amount to billions of dollars.
In such an uncertain situation many investors have decided to sell their Russian shares which they bough on cheaper levels, earlier this year.
Certainly shares of Yukos and Sibneft were worst hit. On Wednesday, the first fell 7, 05 % down to $11,20, and the latter 9,96 % down to $ 2,170. Shares of Gazprom decreased 5,42 % to 34,9 rubles, LUKOIL 5,65 % to $17,37 and Mosenergo 9,77 % to $0,0600.
Last Friday the Russian President discussed the relations between the business-community and authorities with business representatives and stated that this conflict should be perceived as private business, and not like general affairs, including the doubling of the gross national product or struggle against poverty. However a announcement how and when the current affair would be settled would have been more reassuring to the investor community.
Author: Nana Bendukize
