Emerging Markets: Russia



By Kim Iskyan



The Kremlin orchestrated Russneft’s sale back to its founder

Russia’s ministry of finance in early January invited investment banks to pitch for the right to conduct Russia’s first international bond sale in more than a decade. The government has suggested that it may try to raise as much as $18 billion, although analyst forecasts suggest the issuance may be for a more modest $5 billion.

Meanwhile, debt-laden oligarch Oleg Deripaska sold his stake in Russneft, the eighth-largest Russian oil company, back to its founder, Mikhail Gutseriyev. The politically arranged transaction appears to be part of a Kremlin deal to allow Gutseriyev, who fled Russia in 2007 to avoid tax-evasion charges, to reacquire his company in exchange for his assistance in implementing government policies in strife-torn Ingushetia, in the North Caucasus. The Russian government is searching for a way to end the vicious cycle of violence and poverty gripping the area—and Gutseriyev has significant family, business and political ties to the region.

In late December prime minister Vladimir Putin said that the government would implement new measures to limit the inflow of speculative capital while continuing to encourage long-term investment. The remarks, which represent a departure from previous policy, reflect rising concern over continued appreciation of the ruble. But the Kremlin is unlikely to implement currency controls that would have a negative impact on the ability of Russian companies to access global capital markets or would deter foreign direct investment. Putin also reaffirmed that, more broadly, the government is gradually moving toward allowing the ruble to float freely by 2012.   



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