1. The Magazine
  2. July/August 2009
  3. Emerging Markets: Russia

Emerging Markets: Russia

Author: Kim Iskyan

Roundup

 

By Kim Iskyan

 

REGULARS_EM_ROUNDUP_JULY_09_01

Medvedev: Promoting Moscow as finance center

Russia unexpectedly announced that it was abandoning its quest to join the World Trade Organization on its own in favor of applying to enter as a bloc with Belarus and Kazakhstan. The move may be an attempt by Russia to accelerate the accession process, which has dragged on for 16 years. However, analysts believe that accession as a bloc could delay it by several years. Meanwhile, relations between Russia and Belarus are becoming increasingly volatile, as Russia banned the import of a range of dairy products from its neighbor, only to reverse the ban several days later.


At the St. Petersburg Economic Forum in early June, touted as Russia's answer to the Davos forum, president Dmitry Medvedev pushed Moscow as a global financial center and reiterated Russia's desire to make the ruble a reserve currency, both of which are distant goals at best. The volume of deals announced at the gathering was, not surprisingly, down sharply from levels the previous year.

 

A few weeks later, Russia hosted the first summit of the BRIC countries, during which Brazil, Russia, India and China demanded greater "fairness" in their representation in international institutions. But the meeting's final communiqué was cautious, with no mention of controversial issues concerning the US dollar and only vague comments on trade and energy.


During his budget address to the cabinet, Medvedev called for budgetary restraint in the face of an anticipated deficit-the first in 10 years-of 7.4% of GDP. Support for social spending programs and the banking sector remain key anti-crisis strategy priorities. The president confirmed earlier indications that the government may issue debt to help cover the anticipated deficit.


In late May it was announced that Russian state bank Sberbank would buy a 35% stake in GM's Opel, in conjunction with partner Canadian auto parts manufacturer Magna, which will own 20% of the European arm of the bankrupt American automaker. The acquisition suggests that the Russian government is continuing to try to project economic strength globally despite the sharp decline in Russian economic growth.