Russia: Other Points of View

Russia Hosts the BRICS Countries this week

DEAR FRIENDS,  IT DIDN'T HAVE TO BE THIS WAY….

Russia would have gladly cooperated and become a member of the Western community.

Offered no responses to their continual questing to be accepted, below is the final result.

Although no one mentions it, we now have a bi-polar world again––both armed to the teeth militarily.This was and is still needless.

Will we ever learn????

Sharon

Published on Russia Insider News (http://russia-insider.com) 

Russia Warmly Accepted in Non-West Community

Marko Marjanovich

This article originally appeared at China Daily by Dmitri Trenin 

Russian President Vladimir Putin will host two important international summits, one of the BRICS group on July 8-9 and the other of Shanghai Cooperation Organizations members on July 9-10.

For public relations, this will allow him to send a message to the world that despite the rupture with Europe and a new “standoff” with the United States, Russia is anything but isolated.

With leaders of China, India, Brazil, Pakistan, South Africa, Iran and several other countries in attendance, together representing roughly half of the world’s population, Putin will be able to project an image of Russia joining the global “new wave” of non-Western countries raising their profile and expanding their role in the world. 

U.S., RUSSIA AND UKRAINE – “TIT FOR TAT” – DUELING “EXPERTS” AND DUELING NARRATIVES – THE DANGER ESCALATES

Dear Friends,

The article below was written by John E. Pepper, Jr., who for 40 years was in management at Procter & Gamble, and in year 2000 was made CEO and Chair of the Executive Committee of the Board at P&G.  He also has served as Vice President of Finance and Administration at Yale University and has been a director of The Walt Disney Company since 2006. He was responsible for P&G's successful move to Russia.

During the 2000s, John also Chaired the Board for the St. Petersburg State University's new Graduate School of Management which partnered with Berkeley University.  I sat on that Board, and CCI oversaw the funds contributed to and paid out for the renovation of two palaces for the new School of Management. John has a deep appreciation for Russia's history, culture and literature, and he has had long experience dealing with numerous Russians in high places over the years.  He, like many of us, has deep concerns about today's relationship between the two countries.

Sharon

 

June 24, 2015

U.S., RUSSIA AND UKRAINE – “TIT FOR TAT” – 

DUELING “EXPERTS” AND DUELING NARRATIVES – THE DANGER ESCALATES

As we all know, it is hard for an individual or nation to view the world or a particular situation through the eyes of another person or nation.

I have never seen this more true than what is transpiring now over the Ukrainian crisis as it is viewed by the United States and Russia.

This is a subject of deep concern because the security of our world is threatened and we risk losing the need for collaboration on such transcendent issues as nuclear proliferation and terrorism in Iran and Syria.

I could only look with irony at the statement of Defense Secretary Ash Carter as reported in the Wall Street Journal last week that the Pentagon is committing military gear to a NATO task force designed to deter Russian aggression because Moscow is, in Carter’s words, trying to “reestablish a Soviet-era sphere of influence.” 

How precisely that echoes Russia’s concerns—that the West, and particularly the United States, has, over the past 20 years, extended its “sphere of influence” by extending NATO well beyond what was expected in the early 1990s, even to the point of considering expansion to Ukraine and Georgia.  

There is a great danger in the affairs of humans and also of nations in self-fulfilling expectations.  These self-fulfilling expectations can be for the better and they can be for the worse.  The expectations held by Russia toward the United States and the United States toward Russia today are all “for the worse.”

We hear veiled and sometimes bald assertions that Russia intends to enter countries previously part of the Soviet empire--the Baltics, Poland and all of Ukraine.  Putin described such a nation as “insane.”   He is right.  Can you imagine the sheer idiocy of Russia undertaking to move into those countries?  Why would they do this?  There is no driving ideology as there might have been in the case of Soviet Communism.  Surely, Russia has no need for more land.  

Russia, quite understandably, looks for long-term economic and social ties with Ukraine.  But to try to take over a country where the majority of people would be repelled by being part of Russia makes no sense.  It would make Russia the pariah of the world and give them nothing in return but trouble. 

We are failing to seriously examine what is the true strategic intent of Russia.  I am not suggesting that they haven’t supported the Separatists in Eastern Ukraine; I feel quite sure they have, probably to help ensure that a constitutional settlement is finally reached that gives appropriate rights to the ethnic Russians living there. 

The interests of the United States and Russia should be very simple and the same.  We should support what has been so long coming--the creation of a unified Ukraine, with federalization much as it exists in other countries.  Pulling Ukraine together is a huge challenge.  The fissure between Eastern Ukraine and the rest of the country is large, ethnically based and now deepened by a civil war. 

Russia, the United States, all of us, should do everything we can to support this constitutional settlement.  We should not allow anything in our control to get in the way of that settlement, for nothing other than that will bring peace to the Ukrainian people.  And that’s what they want.  That’s what the people in every country want.

I fear that most people are so far removed from the horror of war today that we have forgotten what it’s like.  It might serve everyone to go back and look at the movie “Platoon” or “Saving Private Ryan” again to be reminded what the cost of war is to human life.  

I believe we are at a historical precipice.  I am extremely worried by the unfettered “propaganda,” and that’s what it is, on both sides of the issue.  This has had the insidious effect of bringing the people of Russia and of the United States to view the “other” as “evil.”  And in fact they are not.  They are committed to their own national interests. 

Russia Moves Towards Self-Sufficiency

Friends,  

Not until the sanctions against Russia started was there any push to give serious attention to Russia's agricultural sector.  This was a year ago, hardly enough time to make significant difference in a sector that has not had much attention for decades. Once Russia opened up their borders in 1990, they assumed they could purchase their food abroad rather than trying to revamp the USSR's agricultural system. 

A very impressive teenager some of you met in Moscow in 1983,  Andrei Danilenko, is now the Chairman of Russia's Union of Milk Producers. His opinions are noted under "Sector Shakeup" below.

Will be interesting to see what will happen if Putin, et al, decide to seriously get behind the industry.   S. 

 

Published on Russia Insider News (http://russia-insider.com)

Russia Moves Towards Self-Sufficiency

This article originally appeared at The Moscow Times

President Vladimir Putin appointed a regional governor from southern Russia to head the Agriculture Ministry on Wednesday in an apparent bid to galvanize domestic production, which has failed to take advantage of reduced competition ushered in by a 2014 Kremlin food import ban.

Alexander Tkachyov, the governor of the grain producing region of Krasnodar, will replace lawyer Nikolai Fyodorov, who has been in the post since 2012 and will become a presidential adviser.

“We need our own produce, the produce of domestic manufacturers, to fill our own market and this needs to be done quickly,” said Putin, according to a transcript on the Kremlin’s website.

Moscow banned food imports from the European Union and United States in August in retaliation for a series of Western sanctions imposed on Russia for its role in the Ukraine crisis. Russian officials trumpeted the embargo as a godsend for domestic manufacturers, but overall production has barely grown.

Putin must decide whether to extend the food ban in three months.

Russia on the RISE? NEWSWEEK PREDICTS …..

Friends, the ruble is somewhat recovering, seemingly Russia is also slowly but surely coming back ….  could the agonizing Ukraine debacle, the reuniting with Crimea, the bloody tensions of the past year and the sanctions,  have had a reverse effect than anticipated?

Might they all have been grist for the mill that ground down …. and in an unexpected upturn is becoming the early dawn of a multipolar world?

Check what NEWSWEEK has to say.   S.

And keep your eye on Russia Insider -- which seems to be first with the latest analyses these days. 

Published on Russia Insider News (http://russia-insider.com)

Is Russia's "Bullet Proof" Economy Ready to Blast Off?

Phil Butler 

Watching the tide of foreign policy, influence, and business turn concerning Russia, it’s a rewarding experience for all the moderates of the world. Bill Powell at Newsweek assures the journalistic faithful of Earth there’s even hope for mainstream media today. Despite US and EU sanctions aimed at crippling the Russian economy, Vladimir Putin’s economic endeavors of late have apparently saved the Russian nation’s day.

The Newsweek article, “What Sanctions? The Russian Economy Is Growing Again,” is symbolic of a break in the negative trend toward Russia in many ways. Powell takes something of a leap of faith and credibility in outlining how recent detente has "not exactly what the West was hoping for." Against what seemed like insurmountable economic odds, Putin’s ruble has rebounded, the stock market has out performed most competing ones, foreign exchange reserves are up, and the Russian government’s revenue has even exceeded expectations.

Russia May Be Bulletproof Economically

While crude oil and energy prices have hit Russia companies hard, they’ve empowered Russia industry to some of the highest profits in recent history. This and other “unexpected” stimulus as a secondary result of sanctions, spell a kind of policy disaster in Washington, London, and Brussels.The meat of this story from Newsweek can be found in the MICEX index, as well as on the micro level with companies like steelmaker Severstal (New Renault-Nissan deal) . For those unfamiliar with heavy industry, steel for auto makers and other markets depend, price wise, on the costs of energy used to produce. When I was at Nucor Steel in America, other than the costs of scrap and other raw materials, the electricity to power steelmaking was enormous, critical, a make-or-break commodity. The long and short, in competitive manufacturing price opens or closes markets. The dive in energy costs, combined with other cost/revenue benefits Powell describes, have helped Putin’s finance ministers’ make a fiscal shift toward growth.

Russian Politics: A Different Kind of War

Friends,

 

Chris Weafer, an esteemed, long-term financial analyst in Moscow gives his summary of Russia's economic situation at this stage of the standoff between the U.S., its European allies and Russia.  Chris has remained totally neutral in his analysis over the years, is not involved with the Kremlin and  has been a boon to American and European investors over the years.

 

Chris Weafer

Senior Partner

Macro-Advisory Ltd

Moscow

 

December 4, 2014

 

We have today issued a special report looking at the political aspects – both geo-political and domestic – of the crisis. We address such questions such as “what are the political drivers of the crisis?”, “will Russia back down or continue to live with sanctions indefinitely?”  “Does the crisis risk altering the domestic political balance?”, “what are President Putin’s key geo-political and domestic priorities?”, “how does Russian legislation work?”

Today starts a sequence of important events – five important Thursdays in a row – which will serve to clarify the Kremlin's list of priorities and also what we may expect in terms of investment reforms and risks in 2015. Today President Putin delivered his annual address to the Federal Assembly (State of the Nation address).Nothing new or exceptional (see December macro Monthly to be issued in the coming days). Next Thursday (11 December) the Central Bank holds its last policy meeting of the year and is expected to clarify its ruble policy – if not forced to do so before then. On Thursday 18 December Putin holds his annual televised press conference and will answer questions from the audience and the public. Here also we usually get greater clarity on priorities and policy. That is the same day as the next EU Leaders Summit in Brussels, at which we should hear more comments about sanctions, etc. The followingThursday is 25 December and the fifth Thursday is New Year's Day. Rumors of Cabinet changes are already emerging in Moscow as the period between the Western Christmas and New Year is when such events tend to happen most often.

CEASE-FIRE PROCESS BRINGS SANCTIONS RISK RELIEF

FINANCIAL ANALYSIS

by Chris Weafer

Today we issue our September Macro Monthly for Russia. The breaking news from Kiev (Wednesday morning) is that Russia and Ukraine have agreed to a permanent cease-fire in eastern Ukraine. That was later amended by President Poroshenko's office to state both sides had agreed to a cease-fire process. We have reflected that news in this report but clearly there is a great deal more clarification to come in the days ahead – especially at the NATO summit in Wales (Thursday and Friday). If required we will issue a supplementary note in a few days.

Summary

• The escalation of fighting in eastern Ukraine immediately after the Minsk summit had raised the sanctions threat against Russia. The threats were expected to become even more pronounced in the days leading up to the NATO summit on 4-5 September.
• The breaking news from Kiev (Wednesday morning) is that Russia and Ukraine have agreed to a permanent cease-fire in eastern Ukraine, later amended by President Poroshenko's office to state both sides had agreed to a cease-fire process. Despite Moscow sticking with its long held position that it is not party to the conflict and therefore is not formally part of the peace deal, the news will greatly add to the optimism that the worst of the crisis has now passed. If the agreement is seen to be put into effect then optimism that the existing sanctions against Russia, and the retaliatory actions taken by Moscow, may be removed at the first review date on November 1st.

RUSSIA MACRO-POLITICS: TERMS OF ENDEARMENT

FINANCIAL ANALYSIS

by Chris Weafer

“I have grown to love secrecy. It seems to be the one thing

that can make modern life mysterious or marvellous to us.

The commonest thing is delightful if only one hides it.” 

Oscar Wilde. The Picture of Dorian Gray

Two main talking points. Okay, it’s a cheesy title but nevertheless appropriate. The two big talking points concerning Russia right now are the Ukraine deal and the presidential pardon for Mikhail Khodorkovsky. We know the basic facts about both but not the terms, the small print. Specifically what has, if anything, President Yanakovich agreed to in exchange for the Russian money and what are the terms of Khodorkovsky’s pardon? At yesterday’s press conference Khodorkovsky spoke of an “unspoken understanding” about what he is going to do in the future, which includes staying away from politics. Speculation about the specifics of both deals will continue to preoccupy Russia watchers for many months of 2014.  The fact that President Putin was negotiating with German officials and Khodorkovsky even as law enforcement agencies were preparing a third case is also intriguing. But that’s for another day. 

No immediate impact. Neither event has any short or medium term implication for the stock market, currency or the domestic economy.

May Gazprom get equity in the Ukraine pipe? Without wishing to add further to the plethora of speculation, one issue to watch for concerns Gazprom’s long standing ambition to own an equity stake in the Ukraine transit pipe. Recall that this was eventually part of the deal for cheap gas to Belarus. The point about this is that it would be much easier and cheaper to upgrade that pipe and plug it into the Balkan’s South Stream network than to build the Black Sea transit pipe. It would also satisfy President Putin’s demand that state companies cut spending and, perhaps, allow Gazprom to boost the dividend. 

To access the full report, click Download Russia_Briefing_Dec_23_'13 

CIS/UKRAINE MACRO-POLITICS: A CHOICE OF FAUSTIAN BARGAINS

FINANCIAL ANALYSIS

by Chris Weafer

 “If I ever disappear, please tell people that I ran after the Devil, trying to get my soul back.” 

Tucholke, Between the Devil and the Deep Blue Sea

Newsflow from Kiev is changing almost by the hour but one factor has become clear; President Yanakovich’s previous hope of striking a deal with both Brussels and Moscow has all but gone. The resilience of the protestors in Kiev and the pressure coming from both the EU and Russia means that he is fast being forced into making a choice between east or west. There is no longer any possibility of playing one off against the other and the time remaining to make a choice is running out.

There is also increasing speculation of pressure on Yanakovich from within his support group and the oligarchs. To make some political concessions, e.g. to agree to a one term limit or to call fresh Rada elections, as a way to diffuse the current tensions. The argument being that in such an event both the EU and Russia would back off and wait to see how the situation developed. Purely speculative of course as there is no current evidence that Yanakovich is thinking of yielding any power. Even if that were to happen, Ukraine would still need to work a financial aid deal with the EU/IMF or Russia within months. Muddling through is only an option with a very short shelf-life. Perhaps until the spring, but almost certainly not into the summer without debt re-scheduling. 

To access the full report, click Download CIS_Ukraine_Briefing_Dec_12_'13 

Russia Macro-Politics: Friends Reunited

FINANCIAL ANALYSIS

by Chris Weafer

“History is that certainty produced at a point where the imperfections of memory meet the inadequacies of documentation”

Patrick Lagrange (French historian)

Economic weakness is the dominant concern for Russia. The headlines from Russia are dominated by two issues currently; the rapprochement between Russia and Ukraine and the still weakening domestic economy. In terms of possible market impact the former is potentially very significant for the longer term, especially if Ukraine were to move further and start talks to join the customs union. The latter is of much more immediate concern and unless reversed the weak macro data will soon lead to a scaling back of domestic earnings growth assumptions. That would hurt sentiment towards many of the domestic economy equity market themes and add more pressure on the ruble.

The Iranian deal may impact oil later next year. The international headlines are today dominated with the deal between Iran and the UN to curtail the country’s nuclear programme. That news knocked almost $2.5 p/bbl off the price of Brent in early Monday trading and adds to concern that further, more significant, price weakness may deteriorate Russia’s budget execution in 2014 and add further downward pressure on the ruble.

Friends reunited. It is case of “friends reunited” for Kiev and Moscow, for former Finance Minister Alexey Kudrin (he has been brought back into a formal Kremlin advisory role – see below) and now for Tehran and the UN. The investment implications for all three have been factored into our 2014 macro forecast assumptions and are reviewed in more detail below.

To access the full report, click here  Download Russia_Briefing_Nov_25_'13

RUSSIA MACRO-POLITICS: ONE STEP AT A TIME

FINANCIAL ANALYSIS

by Chris Weafer

“Although it is said that faith can move mountains,

experience shows that dynamite works better” 

Anon

Moving up the rankings. The main news last week was the gain in Russia’s ranking in the World Bank’s 2014 Ease of Doing Business survey. Russia is now ranked 92^nd (out of 189 countries) having moved up from 111^th last year (details below). This does not have any immediate impact on the perception of equity risk, on valuations, on earnings growth, nor on the medium-term macroeconomic indicators. It is important because it shows that the government’s commitment to business reforms is starting to yield some results. 

Russia now ranks 10^th best in the world for contract enforcement.  That disposes of a popular mis-conception about the risk of doing business in the country. 

Reform progress since the last elections. Over the past eighteen months we have seen more progress in advancing reforms that ever before. The list includes WTO entry, capital market reforms, anti-corruption legislation and better budget discipline. It can be argued that these changes are still not much more than a drop in the ocean relative to the size of the problem still to be addressed. But at least we now have reform momentum and that’s not something we could have said before the summer of 2012. 

To access the full report, click Download Russia_Briefing_Nov_5_'13