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Economic News in Review, November/December
18 December 2007
Economic News in Review, November/December

Economic News in Review
Nov/Dec, 2007

The following resource is meant to quickly introduce the reader to some of Russia's major business news for the month. Please note that we strive to focus on more specific, less-well-covered issues. This news review is developed in conjunction with The School of Russian and Asian Studies.


Impact of Politics

With political elections/campaigns in progress, there are lots of forecasts being made as to what economic challenges Russia's government will have to face beyond 2007 and lots of predictions on how the government might choose to deal with those challenges.

New government to face strengthening US dollar and rising inflation
The years of Putin’s presidency have been characterized by favorable economic conditions such as rising oil prices, a weakening dollar and low borrowing costs. However, things are starting to look less favorable.

Mining policy issues up in the air
Towards this natural resource sector, however, Medvedev's record - even for the four years he's been the chairman of the Gazprom board - is a blank.

Will Kremlin Use 1990s Privatizations to Strengthen Grip on Business?
Three State Duma deputies…  have introduced legislation that would impose a one-time 20% tax on profits made from enterprises acquired in the controversial loans-for-shares scheme of the 1990s during the first ten years after those enterprises were acquired.

Putin assures business leaders state corporations will not become monopolies
Putin — who has boosted the government's clout in key industries, including oil, in his eight years in power — told business leaders from the Russian Chamber of Commerce and Industry that the Kremlin does not intend to create "state capitalism."

Medvedev-Putin dream team
If there are any concerns about the arrangement then these are more longer-term.

Like Lenin, Putin believes that… the state must take the lead in creating the middle class and industry that will lead to the bourgeois paradise.

More of the Same, Please
Pro-democracy groups call it political stagnation. Business groups call it stability.


General Predictions

A few more stats and thoughts generally unrelated to the elections.

Russian 2008-2010 Budget Published in English
It shows per-capita spending
 increasing by about ten times over three years. The document is dense but the English is surprisingly readable.

Russia's economy set to grow fivefold by 2020
The World Bank said in a report published on Monday that Russia's economy is now growing at maximum capacity, boosted by high global energy prices and a strong inflow of foreign capital.

World Bank says Russia's inflation could hit 11% in 2007
According to the World Bank, inflation started to accelerate in April and picked up speed in September and October, to total 9.3% for the first ten months of the year, making an annual figure of at least 11% highly likely, compared to last year's 9%.

Russian Small, Medium-size Business Sector Will Reach European Level In 2008
"Amendments are needed granting tax allowances for companies in this sector. Also, material support must be provided to small and medium-size companies and allowances should be granted to them when they are being allocated land plots or privatize leased commercial premises."


Science and Technology 

Russia is actively striving to use its highly educated populace to diversify its economy into areas of high-tech industries and information technology. The effort, however, continues to struggle in large part because of undeveloped infrastructure.

Welcome to the World of InoSMI
Russian internet project InoSMI, recently won an award at the country's prestigious annual Runet Russian Internet Awards. InoSMI is composed of the word "foreign" and the abbreviation for mass media.

Putin Aerospace Push Inspires Soviet Union-Style Bureaucracy
The government has earmarked 674 billion rubles ($27.4 billion) for nuclear energy, 246 billion rubles for aerospace, 149.4 billion rubles for electronics and 130 billion rubles for nanotechnology

Putin Answers Questions on Science in Russia
We just had a meeting with some heads of other major enterprises, people with whom we had discussions at the Council for Science.

Academy of Sciences Gets New Role
The Academy has also received financial independence almost equal to that of a federal agency. At the same time, the Academy has been deprived of government protection against bankruptcy and will be required to perform an annual external audit. The Academy's annual budget is around 20 billion rubles.

Election bounty for universities
Russian universities have been promised a research bounty following the crushing victory for President Vladimir Putin's United Russia party in last week's parliamentary elections.
Moscow student catapulted to fame by Russian YouTube site
YouTube recently launched a Russian language service of their site. That site version has now produced its first pop star.

Russia tops, South Africa last, in literacy study
Ten-year-olds in Russia, China's Hong Kong and Singapore show the greatest reading ability among their peers, according to a global literacy study released Wednesday. 


Foreign Investment

Investment both in and out of Russia continues to grow, as the the news in this section and the section below ("Businesses and Businessfolk") shows.

Russian Foreign Investment Soars
The study, by the Skolkovo Moscow School of Management and New York's Columbia University, found that the top 25 Russian companies in terms of foreign assets have a total of $59 billion in foreign assets.

Congress could face Russia trade vote in 2008
Congress could face a politically thorny vote on trade relations with Russia in the midst of next year's presidential election campaign if Moscow continues to make progress on its bid to join the World Trade Organization, Russian trade experts said on Tuesday.

Eugene Lawson (USRBC) Calls for Institutional Framework for Bilateral Relations
"The negativity that punctuates the current dialogue between the United States and Russia is not only harmful to our respective interests, but also to the world," says Lawson, recipient of the Order of Friendship awarded by President Putin earlier this year.

Mother Russia seen as top dog among emerging markets
"We hopefully will begin to remove some of the political risk barriers to the market moving higher," says Tim Seymour, managing partner at New York-based Seygem Asset Management.

Foreign investment in Russia Empowered
Oil and gas may be out of bounds, but the government is keen to attract investment in power generation.


Businesses and Businessfolk 

Russia: The Rosneft Purge
By trying to keep many strategic assets out of Gazprom's hands, Rosneft has landed itself in a dangerous financial territory: It is $9 billion in debt.

Putin, the 10th Richest Man in the World?
Stanislav Belkovsky alleged that Putin owned 37 percent of Surgutneftegaz, 4.5 percent of Gazprom, and half of Gunvor, which would put Putin’s total personal fortune at $41 billion.

Starbucks Serves It Hot on Old Arbat
This is now Starbuck’s second location in Moscow, after entering the market earlier this year.

BlackBerry To Enter Russian Market At Last
In a country where handset owners love and hate gadgets with a passion, it’s little wonder that a device as innocuous as BlackBerry can still spark off large controversies.

Campbell's focus on China and Russia
"The soup markets of China and Russia represent an extraordinary opportunity for Campbell." The product is now launched with regular TV commercials being aired.

Why Russia's leading steel baron is betting big on America
The recent opening of the first new American steel mill in six years was a big deal for Columbus, Mississippi (pop. 26,000).

Gazprom Says Pricing Drives Expansion
Pricing concerns, not political ones, are the main challenges facing OAO Gazprom's international expansion plans, the deputy chairman of Russia's state-controlled gas monopoly said Monday.

Russia court rules Berezovsky embezzled Aeroflot cash
Investigators said Berezovsky stole about 215 million roubles of Aeroflot funds, of which he had laundered more than 16 million roubles.

New Year Shopping With A Credit Card In Russia
Until recently there have been very few studies into consumer behavior of credit cardholders in Russia, which is somewhat strange as the growth of credit card usage is directly related to all the above factors.


Consumer Spending, Personal Finance 

Most Russians said to favour Soviet-style economy
More than half of all Russians favour a return to a Soviet-style economy and believe democracy could be sacrificed to maintain order, according to an opinion poll published on Thursday.

One Russian Household in Three Now Has a Computer at Home
Home ownership of computer printers is under 10 percent.

Not Down and Out in Moscow
The Millionaire Fair (is) a four-day orgy of conspicuous consumption held at a cavernous exhibition center on the outskirts of the capital.

The U.S.S.R. Is Coming Back (At Least on Clothing Racks)
One of the most popular fashion designers this fall is Denis Simachev, who is selling overcoats fastened with hammer-and-sickle buttons, gold jewelry minted to look like Soviet kopecks and shirts festooned with the Soviet coat of arms, complete with embroidered ears of wheat.

Russia's dacha building boom shows rich-poor gulf
These opulent dachas… looming over a run-down village where people grow their own food and lack running water… present a stark illustration of the widening gap between Russia's rich and poor.

Putin Enacts Amendments To Simplify Documentation of Land Ownership
The amendments mostly make it easier to register land after inheriting it.

In Russia, We Pay Income Tax Like in the East
Russia rates the second in the list of the most attractive tax regimes.


Financial Markets and Policy 

Russia's Ruble Push
At a press briefing last Thursday, Alexander Medvedev, deputy chairman of Russia's state-controlled gas monopoly, OAO Gazprom, said the country is "seriously considering" ways to trade gas prices in rubles.

Russians learn how to save and invest
According to a number of surveys, almost 70% of Russians do not have any savings at all.

Russian Stocks Upgraded at Bear Stearns on Lower Risk
Russian stocks were upgraded to "overweight" from "market weight" at Bear Stearns Cos., which cited a decline in political risk and a likely "important" role for President Vladmir Putin after national elections.


Labor, Demographics, Health

Russia Needs Immigrants (But Not So Many)
The infrastructure of the capital, where more than 30 percent of labor immigrants come (over 50 percent, including the Moscow region around the city), is simply not designed to handle such a number of people.

A New Era for Labor Unions
The past November in Russia will not be remembered for the election campaign, but for the upsurge in workers' protests, whose demands have had to be taken seriously by corporations.

Average Wage in Russia
The average Russian wage has grown nearly 50% since the start of 2006.

Human Potential Top-Notch in Russia
The Human Development Index has been compiled by the UN since 1970. It takes into consideration both economic (GDP per capita) and demographic factors (life expectancy, literacy level, accessibility of education).

New Values Emerging on Job Market
High salary, interesting work and growth potential are becoming more important every year in choosing a career, as the importance of office location, working conditions and benefits dwindles.

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