10.08.10

Economic News in Review
Crisis, Sectors, and Domestic Policy in Russia
July, 2010

Ag

RussiaProfile.Org, an online publication providing in-depth analysis of business, politics, current affairs and culture in Russia, has published an unusual Special Report on the mysterious "Russian soul". Fifteen articles by both Russian and foreign contributors examine this concept, which has been used by Russia watchers for some 150 years, from a contemporary perspective.

As Moscow sizzles in heat that is more Mediterranean than Mid-Russian, most residents have decided it’s party time. But away from the river banks and summer bars not everyone is enjoying the hot weather quite so much. For Russia’s farmers it’s a time of concern – and in some cases a time for lurid scare stories about drought and famine stalking the land.

Russia’s worst drought in a decade has damaged more than half of grain planted in 11 regions and hot, dry weather may continue for the rest of this month, a meteorologist said.

As Russia suffers its worst drought in a decade, officials advised grain farmers in central Oryol province to start harvesting at night to protect their combines against mechanical breakdowns in the daytime heat.

Moscow is set to break a heat record for a second day running as wildfires rage across European Russia, burning entire villages to the ground in some regions.

Domestic

Russian Finance Minister Alexei Kudrin’s proposal to raise the retirement age is an attack on the United Russia party that Prime Minister Vladimir Putin chairs, a senior party official said.

Fifty percent of Russians have to spend all their money on current consumption without saving anything. A quarter of the Russian nationals have savings, but only 8 percent of them can live on that money for over one year.

“Emerging venture capital funds and start-up companies deal with much higher levels of risk and enter into more complex relationships. We also need new organisational and legal structures that will be best suited for addressing these challenges.” – President Dmitry Medvedev.

Foreign

President Barack Obama's recent pledge to help Russia complete its 17-year quest to join the World Trading Organization may be just enough to get the deal over the finish line, trade experts said.

Revitalizing U.S.-Russia Trade

After a year and a half of diminished trade flows and slow-moving negotiations, recent months have seen hopeful signs of a revival in U.S.- Russia trade relations.

Gas

Russian oil has taken an unexpected turn to the US, where it is making inroads on the West Coast. Oil refineries spanning the area between the Puget Sound in the Pacific Northwest and greater Los Angeles have been quick to try out oil that is landing in tankers sent from Russia's eastern coast.

U.S. business magazine Fortune has named Russian gas giant Gazprom the world’s most profitable company, the magazine said late Thursday.

Russia, the world's largest oil producer, must carve a careful path between its efforts to improve ties with Washington and its historic relationship with Iran, a fellow oil and gas power.

TNK-BP, the Russian joint venture of BP and one of its crown jewels, revealed soaring profits on Tuesday as it emerged that outgoing BP chief Tony Hayward is to become a director at the firm.

Infrastructure

Moscow drivers suffer the longest traffic jams of major cities, making for a “grueling” atmosphere that inhibits commerce, International Business Machines Corp. said.

Expats grumble that queuing in Russia is a national sport, and now it seems they are right. Russian queues are not only the longest in European countries, but also some of the slowest. And the moaners now have science to back them up.

Though it’s not quite true that Russia has “no roads, only directions”, the old saying isn’t far off the mark. The World Bank’s recent report on Russia’s economy notes that the Eurasian giant’s road network is primitive and crumbling…

Investment

Finance Minister Alexei Kudrin on Wednesday called for more private sector investment, arguing that heavy state spending will only hurt the economic recovery in the long run through higher inflation and a stronger ruble.

Time and again, we hear dire warnings about Russia and its place among the BRIC nations. That’s great news for investors.

Russia plans its biggest sell-off of state assets since the early 1990s as it seeks to raise over $29 billion to plug budget gaps over the next three years, finance ministry sources told Reuters on Saturday.

Russia's move to sell $29 billion in state assets fleshes out the Kremlin's plan to lure investment and slash the budget deficit, but much will depend on how the sales are implemented, investors said on Monday.

Labor

Many have welcomed the opportunity to speak openly about Moscow's changing ethnic landscape and how and if migrants should be integrated.

A leading consultancy group Mercer named Moscow Europe's most expensive city for expatriates, and placed the Russian capital fourth in its latest worldwide Cost of Living Survey, the company said on its website.

St. Petersburg State University is best known as an incubator of many of Russia's leaders, past and present. Lenin was a graduate, as are both the current prime minister and the president. But the institution that is sometimes referred to as Russia's Harvard is now making news for a less distinguished reason: an ugly public fight between its rector and some faculty members.

Nothing touches Russian heartstrings like tales of adopted infants being mistreated in foreign lands. Trans-Atlantic adoptions gone wrong provoke tabloid hang-wringing and righteous indignation from officials.

Law and order

Russia President Dmitry Medvedev has ordered an investigation into allegations that a top Kremlin official took huge bribes in connection with the 2014 Sochi Olympics. Analysts are unsure whether it's a sincere crackdown.

Russian lawmakers say they plan to overhaul the law on economic crimes, resulting in the early release of as many as 100,000 imprisoned executives and entrepreneurs as the government seeks to attract investors.

The Yukos case has always been of fundamental significance to Russia investors. The original arrests marked the end of what might be called the "liberal progressive" period of Vladimir Putin's presidency. As Yukos was transferred to the state through a series of corrupted political interventions, so Putin's policies became increasingly harsh.

The Investigative Committee of the Russian Prosecutor General's Office has overturned its decision not to prosecute police officers who handled a case against British hedge fund lawyer Sergei Magnitsky, who died in a Moscow jail in November 2009, a committee spokesman said.

A Russian court on Monday convicted the organisers of a provocative 2007 art exhibition of inciting hatred, fining them up to 6,500 dollars in a case fiercely criticised by rights activists.

The controversial self-styled scientist Viktor Petrik, who looks set to benefit from a multi-billion-dollar nationwide water purification program, has come under fire from the Consumer Rights Society, which is suing the inventor for what it calls “useless water filters.”

Russian police on Friday detained two journalists and 15 protesters at a suburban Moscow forest where they have been living to try to protect the woods from destruction.

A band of 100 masked people staged a violent environmental protest in a quiet Moscow suburb, hurling Molotov cocktails and fireworks at city hall while objecting to plans for clearing a local forest for highway construction, Russian police said.

The average bribe has nearly doubled from 23,000 rubles ($760) last year to 40,000 rubles ($1,320) in the first six months of 2010, the Interior Ministry said Tuesday. Bribes have become more expensive because those engaged in the widespread practice are rejecting small bribes as too risky amid a Kremlin-led fight against corruption, the ministry said.

One day last fall, a police officer here put on his uniform and sat on a drab tan couch before a video camera. In a halting monotone, he recorded two video appeals to Vladimir V. Putin, 13 minutes in all. He was a nobody cop from a nowhere city, but his words would startle this country.

Public opinion

Modern Russians still hanker after the good old days of Communism, pollsters find.

Russians are gradually becoming aware of the concept of volunteerism and beginning to trust social organizations.

Technology

Earlier this month, inside Paris' majestic Grand Palace, Russia was showcasing its cultural and technological achievements.

Spam is all around and makes up 80 per cent of our internet traffic, according to NGO Spamhaus. It can range from the irritating to the potentially very harmful - with Russia earning itself a bad reputation as a nest of cyber-vipers.

More than 25 senior Russian officials have followed the president's suit and opened accounts on the micro blogging site Twitter.

Russian President Dmitry Medvedev hailed a decision by Germany’s Siemens AG to join his ‘Silicon Valley’ innovation project in Moscow’s Skolkovo suburb, run by billionaire Viktor Vekselberg.

On his recent trip to the United States, Russian President Dmitry Medvedev visited California's techno-hub, Silicon Valley, to meet with high-profile IT and Internet companies and explore further U.S.-Russian business ties. The visit was consistent with Kremlin efforts to foster high-tech innovation and diversify Russia's oil- and gas-dependent economy.