Russia 110308 Basic Political Developments
National Economic Trends MARCH 8, 2011 Senior Bankers in U.S. to Advise Russia
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- Oil instability a windfall for Russia
- East Europe Today: Russian Credit Risk at Lowest Since 2008
- Wheat Planting Falls to Four Year Low in Russia as Export Ban Hits Farmers
National Economic TrendsMARCH 8, 2011 Senior Bankers in U.S. to Advise Russiahttp://online.wsj.com/article/SB10001424052748703883504576186861858913244.html By LIZ RAPPAPORT And DAN FITZPATRICKThe Russian government has been reaching out to the top Wall Street investment banks and private-equity firms in an effort to bring more high-profile, foreign money to companies and projects in the country. The initiative is the brainchild of Russian President Dmitry Medvedev and it includes a steering committee created last year that is chaired by Russia's Prime Minister, Vladimir Putin, said people familiar with the matter. The steering committee has reached out for advice and guidance on Russia's economic development from the chief executive officers of major U.S. Wall Street powerhouses including Goldman Sachs Group Inc.'s Lloyd Blankfein, J.P. Morgan Chase & Co.'s James Dimon, and Bank of America Corp.'s Brian Moynihan. The committee is called the International Advisory Council to the Presidential Commission on Moscow as a Financial Center. While the chief executives of these major firms agreed to advise Russia on its developing capital systems, they aren't expected to meet together in a room at any point. They have no official mandates to manage Russia's money or advise the government, said the people. One of the ideas discussed by some of the members of the committee was to entice foreign cash by putting Russia's own money into a fund with non-Russian investors, particularly private-equity firms. There is no specific fund currently being raised, said people familiar with the matter. "The idea of creating [such a fund] is being discussed at various meetings," a spokesman for First Deputy Prime Minister Igor Shuvalov said. But he declined to discuss details of the steering committee and other details, saying the idea is still being discussed. Russian officials have reached out to test private equity firms' interest in Russia with executives at Blackstone Group LP, among others. Blackstone expressed interest in the idea, said people familiar with the matter. Other private-equity executives said they considered working with Russia on a prospective plan but decided against it. The Carlyle Group, which has invested in Russia in the past, several months ago decided against participating in the effort, according to someone close to the matter. The Financial Times reported Sunday that Russia is setting up a $10 billion fund to co-invest with international private-equity firms. —Gregory Zuckerman contributed to this article. Write to Liz Rappaport at liz.rappaport@wsj.com and Dan Fitzpatrick at dan.fitzpatrick@wsj.com
"Budget revenues have become considerable," Putin all but gloated on national TV amid unrest in the Persian Gulf. By ANDREW E. KRAMER, New York Times Last update: March 7, 2011 - 8:43 PM MOSCOW - Whatever the eventual outcome of the Arab world's social upheaval, there is a clear economic winner so far: Vladimir Putin. Russia, which pumps more oil than Saudi Arabia, is reaping a windfall from the steep rise in global energy prices resulting from instability in oil regions of the Middle East and North Africa. Riding the high oil prices, the Russian ruble has risen faster against the dollar this year than any other currency, which is helpful because it will curb consumer inflation during an election year. Russian stocks are buoyant, too: The Micex index closed last week at 1,781, up nearly 6 percent since the beginning of the year. (Monday was a holiday in Russia.) But the Russians could not step in to offset any potential big drop in global production, because Russia does not have any oil wells standing idle that would allow it to increase production. Right now Russia is pumping oil at its top capacity. But at last week's closing of $114, the price of each of those barrels of Ural crude, the country's main export blend, has risen 24 percent since the beginning of the year. Last week, Prime Minister Putin sat down for a televised meeting with Finance Minister Aleksei Kudrin, which was nationally televised on state news channels for the public's enlightenment as the two discussed, just short of gloating, the benefits to Russia of a global oil panic. "Mr. Kudrin, budget revenues have become considerable," Putin said matter-of-factly. Kudrin agreed, noting that if prices hold, Russia will be able to resume contributions to its sovereign wealth funds for the first time since the summer of 2008, when the global recession began. Russia is building a pipeline under the Baltic Sea directly to Germany, called Nord Stream, and has proposed another similar pipeline under the Black Sea to Bulgaria. It says these pipes will reduce the risk of traveling overland through central European countries that are unfriendly to Russia, but some European governments have balked at the high cost and political subtexts of these projects. When Putin visited Brussels last month, he had a new argument for these pipes, which he has championed for years. "I am confident that the real long-term interests of the European economy lie with our resources," Putin said at a news conference. "Nothing matters more than stability." East Europe Today: Russian Credit Risk at Lowest Since 2008By Douglas Lytle - Mar 8, 2011 7:33 AM GMT+0100 Russia Credit Risk Declines to Lowest Since August 2008 (2) The cost of insuring Russian government debt against default fell to the lowest level since August 2008, according to CMA prices for credit-default swaps.
Russia’s ban on grain exports means the country’s farmers will plant the fewest wheat fields in four years, another sign that global prices will keep rising. Wheat plantings in the country, once the second-biggest exporter, will drop 2.3 percent to 64.2 million acres for this year’s crop, according to the median in a Bloomberg survey of as many as 19 producers, traders and analysts. Farmers can’t plant more because the ban imposed after last summer’s drought is limiting farm income. Diesel was 30 percent higher than a year earlier in January and OAO Acron, Russia’s third-biggest nitrogen fertilizer producer, raised some prices by more than 12 percent for the first half. The 84 million-metric-ton grain harvest anticipated in the survey is 1 million tons below what the government says it needs to consider lifting the seven-month-old export ban. The absence of Russian supplies comes as the U.S. says global grain inventories will drop 13 percent, riots topple leaders in Tunisia and Egypt and governments hoard food. “The situation in Russia is absolutely crucial,” said Sudakshina Unnikrishnan, a London-based commodities analyst at Barclays Capital, the most accurate wheat-price forecaster in the first two quarters of 2010, according to data compiled by Bloomberg. With global stockpiles reduced, “we’d be starting a year off on a much weaker footing,” she said.
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