To date this blog has focused perhaps too much on the issues facing Russia, the widespread poverty, corruption and indifference of the powers-that-be.
However, things aren’t much better in Europe and the US, as a new hard-hitting documentary points out, covered in an excellent article in the Guardian http://www.guardian.co.uk/film/2013/feb/02/inequality-for-all-us-economy-robert-reich
Just like Russia, a small minority in the US and UK own the majority of assets. Unfortunately, this is rarely reported. As well as highlighting inequality and the squeeze on the middle class and poor, the documentary stresses the negative impact that such government policies have on the economy, with all hopes of growth destroyed by futile austerity.
Meanwhile, as indicated in another report recently, based on Sberbank data, almost 90 per cent of Russians own their properties – compared to a far lower figure in the US and Europe. This has historical roots (decree by Russia’s first President Boris Yeltsin to allow Russian citizens to privatise the state properties where they live). At the same time, to date Russians have to a large extent abhorred debt (I am not talking here about the dishonest oligarchs, but instead the general public), preferring either to pay cash for property or to repay loans/mortgages early.
And given the high budget deficit issues in the West, compared to Russia, it remains unclear how the situation will develop over time. A recent Economist report focused on the unsustainable nature of the welfare state in the UK and highlighted successes in Nordic countries.
In an interview given to the Russian business daily Kommersant (13 November 2012), Mostotrest General Director Vladimir Vlasov discussed the issues that you face if you attempt to build infrastructure in Russia. He should know: Mostotrest is a major diversified transport infrastructure construction company in the country, inter alia the largest bridge builder in the Russian Federation in terms of revenue.
He also disclosed that the company planned to buy from businessman Arkady Rotenberg for RUB 7.87 billion (approximately GBP 160 million) the North-West Concession Company, which is the concessionaire of the high-profile construction project – the paid highway Moscow-Saint Petersburg, as part of plans to diversify the business. At the same time, it is worth noting that Rotenberg is the main shareholder in Mostotrest.
Vlasov explains that, while there are no obstacles blocking the access of foreign companies on the Russian infrastructure construction market, there is one issue that may hold them back – the inability in Russian conditions to plan for all the potential risks that may arise and the fact that from the very outset in Russia sites are not ready for construction and necessitate a completely different approach: to build at extremely rapid tempos once the sites are ready to compensate for lost time.
According to Russian business daily Kommersant (13 November 2012), billionaire oligarch and Dagestan Senator Suleiman Kerimov is once again providing funds for SMP-Bank, which is owned primarily by brothers Boris and Arkady Rotenberg (with interests of 37.27 per cent each), who allegedly have close ties with President Vladimir Putin.
As in August 2012, Kerimov is placing a USD 50 million subordinated deposit at the bank, which will subsequently be classified as capital further to a request filed with the Central Bank by SMP-Bank. This move will enable the bank to keep its capital adequacy ratio at above 10 per cent.
According to the Russian business daily Kommersant (19 November 2012), welded and seamless steel tube and pipe manufacturer Chelyabinsk Pipe-Rolling Plant (ChelPipe) has submitted plans to the Ministry for Economic Development to dismiss 8 per cent of the personnel over 2012-2013 (1,400 production staff), attributing the move to the need to close down inefficient production facilities. It had already sacked 450 people by September.
According to analysts, the company had no choice due to its high debt burden, the debt restructuring assistance it received from the state and falling large pipe sales owing to the current economic slowdown.
According to Czech media (15 November 2012), Russian state nuclear power corporation Rosatom may acquire a 49 per cent interest in the JV Nuclear Energy Company of Slovakia from Czech energy company ČEZ. The other partner in the JV is Slovakia’s JAVYS.
The JV is building a new power unit of the Bohunice Nuclear Power Plant project located in Slovakia. The construction contract is worth an estimated GBP 2.4 billion. Rosatom also supplies reactors for two units being built at Slovakia’s Mochovce Nuclear Power Plant.
According to Russian business daily Kommersant (16 November 2012), US architecture, planning, management and design company Albert Kahn Associates is participating in the construction of a rail car production plant in Lipetsk at an estimated cost of RUB 14 billion (approximately GBP 278 million), with the capacity to produce 12,000 rail cars a year.
The project is to be implemented by the company Lipetksk Rail Car Construction Plant, which has filed a corresponding request with the authorities for the right to receive the status of resident of the Lipetsk Special Economic Zone, which would provide a significant number of tax breaks.
As well as Albert Kahn Associates, investors may include two businessmen linked to the diversified holding company Sistema. If this is the case, presumably these businessmen would then sell on their interests to Sistema, which has interests ranging rom IT and telecoms, to banking and insurance, media, pharmaceuticals and oil. Sistema has also been developing a rail freight business and sought to buy 25 per cent of Russia’s largest operator Freight One, only to lose out to Vladimir Lisin’s Novolipetsk Steel.
According to the Russian business daily Kommersant (16 November 2012), the price per global depositary receipt will range from USD 20-25 during its listing on London Stock Exchange. and Moscow. As a result, the whole of MegaFon is being valued at approximately USD 11-14 billion.
Swedish telecoms operator Telia-Sonera and MegaFon Investments (owned by MegaFon) will be selling interests. After the IPO Alisher Usmanov’s AF Telecom will retain over 50 per cent of the mobile operator, with TeliaSonera holding 25 per cent minus one share.
In addition, MegaFon CEO Ivan Tavrin will own 1.25 per cent of the mobile operator through the purchase of 7.75 million shares from MegaFon Investments within one month of the IPO.