Russian remedy

‘I think he should get well as soon as possible. Otherwise we will have to send him a doctor and clean up all the problems.’ Vladimir Putin’s stinging diagnosis was directed at Igor Zyuzin, the billionaire owner of Russian steel giant Mechel, for turning down a summons from the government due to sickness.

The Russian prime minister made sure the media was fully aware that Mechel would be held to account for allegations of price-fixing, tax dodging and selling products more cheaply abroad than domestically. The message was unmistakable and shareholders took note - in their droves.

The reasoning behind Putin’s radical approach, which prompted plummeting stock prices on the RTS index, has been the source of much debate.  What is clear, however, is that foreign investor sentiment is changing with regards to Russia.

Earlier this year, Russia came out very favorably in the minds of 500 investors and analysts who were canvassed IR magazine’s Investor Perception Study, Continental Europe, 2008/2009. This was primarily due to the country’s scant exposure to the credit crunch, for the simple reason it had has very little credit.

Compounding the Mechel saga, fears over ongoing events in Georgia have left Russian companies licking their wounds as foreign investors want out. Russian daily Kommersant says Western investors are ‘losing their common sense when assessing the current situation on the Russian market’ and for being influenced by negative rhetoric in the media.

The ongoing rift between BP and major shareholders in its joint venture TNK-BP has done little to ease public opinion. An insider at BP informed IR magazine he found Russians adopted a more combative approach to negotiations than most other countries. He made this comment in reference to recent events in Georgia, where the group has a major oil and gas line linking Azerbaijan to Turkey and the Med.

Despite TNK-BP’s CEO Robert Dudley recently having his visa suspended, the source remains confident both parties will come to an agreement. But he adds ominously; ‘It is made more difficult when our partners are able to use government offices and officials in Russia to their own advantage against us.’ 

Declining oil production and renewed fears of speculators targeting the Russian market are fuelling the need for Russian IROs to up their efforts. There couldn’t be more timely an occasion for the IR magazine Russia & CIS conference and awards, which take place in Moscow on 23 October.

Fay Sanders
International editor
IR magazine

Comments

[Dmitry Bobrov]

Fay,
Thank you for attention to our market.
It is very strange situation on the market now – Russian securities are really undervalued. We thought about investing all our september’s salary on the stock market (of cause, it is a joke, but…)

[Gleb]

Lucky for you you didn't invest in light of this week's results! ;)