By Kim Iskyan
In a jam: Economic crisis hit Russia’s car market hard
In late February prime minister Vladimir Putin rebuked four Russian oligarchs with significant investments in the country’s power sector for not following through on investment obligations that had been a prerequisite of their participation in the privatization of electricity-generation companies. But the prime minister’s remarks were more to play a populist card than substantive and serious criticism and obscured the importance of Putin’s approval of the key points of the development of a long-term capacity market.
Russian carmaker Sollers announced in mid-February that it was teaming up with Italian automaker Fiat to construct a $3.3 billion facility to build 500,000 cars a year for the Russian market. Automotive sales collapsed by 50% in Russia during the economic crisis, just as Russia was set to overtake Germany as Europe’s largest car market.
The never-ending saga of Yukos, at one time Russia’s largest private oil company, took a new twist as the European Court of Human Rights heard a $98 billion suit launched by Yukos for what it claims was the “disguised expropriation” of the oil company by the state. Former Yukos head Mikhail Khodorkovsky is meanwhile on trial on new charges of fraud and embezzlement, which could put him behind bars for an additional 22 years.
In another sign of the slow return to growth of the Russian economy, steelmaker Severstal announced that it would increase capital spending by 40% in anticipation of resumed growth in demand. But investment will still be well below the $3 billion that was planned for 2009 before the economic crisis struck.
Closely watched regional elections in mid-March resulted in a broad sweep by United Russia, the party of power. But unlike in disputed elections in October, which resulted in widespread criticism of apparent results falsification and voter fraud, parties other than United Russia also won a few polls, most notably for the mayor of the Siberian city of Irkutsk. There is very little threat to the existing national power structure, though, with approval ratings for both Putin and President Dmitry Medvedev remaining well above 70%.