From Russia With Love?

Contrary to popular perception, Russia is said to be seeking public-private partnerships with western experts to invest vast sums of Russian savings, Charles Ryan, Chief Executive Officer, Deutsche Bank (Russia) said at the Heritage Foundation last week.

He said today Russia has over half of its Gross Domestic Product (GDP) in cash yet 25 million people in Russia live in poverty. The reason, according to Ryan, is that that institutions in Russia are still weak and the Russian bureaucracy is not trusted to invest that money wisely.

“Therefore there is a desire to engage western business, to get them involved in public-private business partnerships, to use western expertise to find some cost discipline to how this money is disbursed,” Ryan said. He noted that due to lower taxes there, 80 % of Russian wages are disposable which has fueled massive consumption in Russia.

On the same panel at Heritage, Patricia Cloherty Chairman and CEO, Delta Private Equity Partners LLC (and also Manager of the US-Russia Fund), said that “in 1995 there were two shopping malls in Moscow, today there are 2,444 and growing.”

She added that people doing business in Russia today tend to be “cheery and chipper and policy analysts tend to be gloomy.”

Pointing out the underreporting of Russia in the Western media, Andrew C. Kuchins, Director and Senior Fellow of the Russia and Eurasia Program, said that “this transformation of Russia from an Economic basket case to an emerging market powerhouse is very much under-appreciated.” Mary Warlick, Senior Director Russia, National Security Council, however points our that “American investment in Russia increased by more than 50% last year.”

However, amidst all this macro economic growth in Russia, there is a growing concern about the new strategic sector law that was proposed in September this year to restrict foreign companies investment in 49 sectors as well as limit foreign companies ownership only up to 50% of state-owned companies. Meanwhile, Russian President Putin last week was among the signatories to the Tehran declaration where Presidents of five Caspian Sea littoral states (Iran, Russia, Azerbaijan, Turkmenistan and Kazakhstan) signed a 25-article declaration on October 16th to promote regional cooperation among the sea’s littoral countries which also includes that construction of all future pipelines will need to have approval of all the five littoral states, a move that was opposed by Kazakhstan.

Nevertheless, the recent visit of Secretary Rice and Gates was quite positive, according to Warlick. “What we came away with was an understanding on both sides (certainly endorsed by President Putin and his negotiators) that we want to continue to try to make progress and make a way forward to cooperate on missile defense and also to move forward on the questions regarding the Conventional Armed Forces in Europe (CFE) treaty,” Warlick said.

Emmanuel Opati is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.