Author: Kim Iskyan




By Kim Iskyan



Medvedev : Budget focuses on short-term measures

The long-anticipated IPO of Russian aluminum producer Rusal was delayed until the first half of 2010 after the Hong Kong stock exchange declined to approve the controversial issue. Listing officials likely wanted to improve their level of comfort with majority shareholder Oleg Deripaska, one of Russia’s more aggressive oligarchs, who has been denied a visa to visit the US, allegedly because of concerns about possible links to organized crime.


Disappointed creditors and minority shareholders of Rusal, some of whom had been promised some of the proceeds of the deal, will probably bend to Kremlin pressure and refrain from launching proceedings against the company. The Russian government is eager to maintain the status quo surrounding the company and to head off possible layoffs that might result from the launch of bankruptcy proceedings.


In early December president Dmitry Medvedev formally signed into law the 2010 federal budget, which sharply increases spending on social services and debt expenditures while cutting health and education expenses. The Kremlin’s underlying concern remains cushioning the impact of the economic crisis on the population, at the expense of long-term investment focused on promoting economic growth and diversifying the economy. If oil prices remain strong, the anticipated deficit— Russia’s first in a decade—may well come in lower than the anticipated 7% of GDP, which could spark a political battle over how to spend higher-than-anticipated revenues.


French carmaker Renault has again resisted Russian government pressure to increase its cash investment in Avtovaz, the ailing car producer in which Renault holds a 25% stake. The Kremlin wants a partner to share the financial and managerial burden of supporting the company. But Renault, which invested $1 billion in the company in early 2008 before the Russian automotive market saw sales plunge by more than 50% in the economic crisis, is having problems in its home market and is unlikely to invest more to support its Russian adventure.


Responsibility for the bombing of a train between Moscow and St. Petersburg that killed more than 25 people was claimed by a Chechen terrorist group. The attack was the first outside the Caucasus region since 2004 and raised fears of a renewed campaign by rebels in the Russian heartland.