Russia 111130 Basic Political Developments

Growth must be green

Russia could create millions of jobs by investing in clean-energy technology and insulating buildings.The head of the United Nations Industrial Development Organisation (Unido) gives Russia some tips on sustainability.

Russia beyond the Heahlines: What is Unido’s main focus in developing countries?

We focus on a niche area of industrial development – pollution management and green industries. In today’s context of climate change and resource efficiency in an overpopulated world, these areas are important to help provide solutions to increasing production and consumption. While market forces are important, industrialisation does not occur by accident. From Singapore to the EU, it’s been determined by the leaders. We want governments to mobilise their private sectors to engage in a green transformation.

RBTH: How do you envisage this green transformation will take place ?

K.Y.: Experts call it a third industrialisation based on green growth. Strong public-private partnerships in green industries are needed, where the state hedges some investment risk while allowing market forces to operate.

RBTH: How are Unido’s plans being realised in Russia?

K.Y.: We’re pushing a number of projects in Russia focused on green energy and cleanup production. These include a centre for the disposal of hazardous consumer products and industrial waste in the Republic of Tatarstan, and a $1.5m (£960,000) project to improve water quality and reduce the impact of industrial activities in the middle and lower Volga basin. We’re also promoting the production of energy-efficient refrigeration and air-conditioning systems via technology transfer.

RBTH: What specific green technology suggestions would you like to see in Russia?

If Russian authorities were to adopt new municipal building codes and use public money to build new insulation, they could create millions of jobs. Mayors – like Michael Bloomberg of New York City – will tell you one of their biggest challenges was figuring out how to keep skyscrapers hot and cool. They’ve been thinking about incentives for owners and tenants to be energy efficient. We’re pitching these ideas to wealthy Russians as new business opportunities. The message I brought to the Nevsky Ecological Congress in St Petersburg this year was that Russia has always been a leader in science, but there has not been enough mobilisation for it to lead the green revolution. Russian scientists who can lead this research are out there.

RBTH: What long-term challenges does Russia face in the context of green growth?

K.Y.: When Russia went through rapid industrialisation, sustainability was not an issue. There are now places where accumulated pollution has killed ecosystems, and contaminated heavy-metal production sites where pollution is seeping into waterways. But technologies to clean up these problems do exist.

How do you promote energy efficiency while stimulating economic growth?

K.Y.: Japan and Denmark have shown you can grow GDP continuously while cutting energy use – the new government in Denmark is pitching green technologies as a way to stimulate economic growth. But I don’t think this mentality has gained a foothold in Russia yet. The government has set up an energy-efficiency programme, and I have heard people ask: “What for? We have lots of energy!” The answer is that there is a high demand for that energy – what you don’t waste, you can sell to other countries.

Business, Energy or Environmental regulations or discussions

Telecoms Posting Monthly Gain as Futures Rise: Russia Overnight

OAO Mobile TeleSystems (MBT), Russia’s largest mobile operator, and competitor VimpelCom Ltd. (VIP) are headed for a second straight monthly advance on prospects usage of digital services will increase next year.

U.S.-traded shares of Mobile TeleSystems, known as MTS, jumped 4.1 percent in New York yesterday and are up 14 percent this month, while VimpelCom climbed 0.1 percent, extending the November advance to 3.6 percent. The Bloomberg Russia-US 14 Index of Russian companies traded in the U.S. is down 4 percent for the month after adding 0.4 percent to 95.41 yesterday.

Russian telecom company earnings may jump 13 percent next year as the country’s middle class uses more digital services on hand-held devices, said Chris Osborne, chief executive officer of Troika Dialog USA, a unit of Russia’s oldest investment bank. Mobile TeleSystems trades at 11 times analysts’ earnings estimates, compared with 23 times for Bharti Airtel Ltd. (BHARTI), India’s largest mobile-phone operator, and 13 for Mexico City- based America Movil SAB (AMXL), data compiled by Bloomberg show.

“MTS has been a big underperformer and a cheap stock for a long time,” said Osborne in a phone interview in New York yesterday. “Yet on overall multiples and growth, there are many telecoms trading at a premium to MTS but don’t have the same growth profile. As more people enter the middle class, you’ll get more minutes of usage and more people using digital, and that’s what drives growth.”

Futures expiring in December on Russia’s dollar- denominated RTS index rose 1 percent to 147,795 by 2:50 p.m. in New York yesterday. The measure in Moscow has dropped 5.3 percent this month, while the ruble-denominated Micex index lost 2.9 percent. The RTS Volatility Index, which measures expected swings in the index futures, dropped for the second time in three days, falling 2 percent to 49.51 points.

Bank Downgrades

The Market Vectors Russia ETF (RSX), a U.S.-traded fund that holds Russian shares, was little changed at 29.33, while the Bank of New York Mellon Russia ADR Index rose for a second day, gaining 1.9 percent to 800.33.

The Hong Kong-traded shares of United Co. Rusal, the world’s largest aluminum producer, lost 0.9 percent to HK$5.47 as of 11:17 a.m. local time. The MSCI Asia Pacific Index declined 0.6 percent after Standard & Poor’s reduced credit ratings for lenders from Bank of America Corp. to Citigroup Inc.

S&P cut Bank of America, Citigroup Inc. and Goldman Sachs Group Inc.’s long-term credit grades to A- from A after the ratings firm revised criteria for dozens of the largest global lenders. S&P made the same cut to Morgan Stanley and Bank of America’s Merrill Lynch unit.

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