More flights to the USA
American Airlines has opened a Moscow-Chicago route ending the monopoly of Delta Airlines among US carriers in serving Russia. The six flights a week with Boeing 777 aircraft arrive in Chicago late afternoon and in Moscow mid-day will be increased to a daily service next year. The airline operates from Domodedovo. Many international airlines are dropping unprofitable domestic and international routes and switching resources to routes yielding higher revenues. American is hoping for yields of over $12,000 for a first class return to Moscow and over $8,000 business class to offset an 82 percent increase in aviation fuel prices over the last year.
Sochi plan to be in practice by October
Construction of arenas and hotels, renovating tired infrastructure and dealing with ecological problems in preparation for the 2014 Winter Olympics in Sochi have assumed priority status within the Russian government. Prime Minister Vladimir Putin is said to be personally involved with ensuring the first winter Olympiad to be held in a subtropical resort, is a success. With the combination of its Black Sea coastline and mountain skiing facilities, Sochi offers multi-season tourist potential, and the government sees the investment in the Olympics as reaping long term benefits to the economy.
20% rise in elite housing rents forecast
Prices for residential real estate in developing countries continue to show dramatic growth despite the world credit crisis. Average rental prices in Moscow spiked nearly 8% in January to $4,783 per square meter, with oneroom apartments demonstrating the highest price growth (20%). Analysts attribute this price surge to investors moving away from the stock market to the real estate market. Russia ranked third among nations by real estate price growth last year with a 30% increase, and prices for elite real estate in its capital are projected to climb 20% this year. In 2010, Moscow’s ultra-luxe Rublyovka Shosse will welcome another elite gated community – Gribanovo, a 470-hectare development slated to include an 18-hole golf course. 800 mansions in five architectural styles ranging in size up to 1,600 sq. m. will be included in the development. Critics believe the greatest challenge posed towards elite suburban building outside Moscow is lack of infrastructure. Also, Gribanovo’s proposed golf course is located on oil & gas pipelines, which pose a problem for construction.
Hilton hotels planned for all major cities in Russia
London & Regional Properties, a UK-based investment fund, is planning to build Hilton hotels and business centers in every Russian city with a population of over 1 million, Managing Director David Geovanis said. London & Regional Properties, which represents Hilton’s interests in Russia, has property assets worldwide worth over $10bn. The company entered Russia three years ago, and since then has invested around $1bn in real estate construction projects in Moscow and other parts of the country.
Gold miner to ramp up production
Canadian Miner Kinross Gold is bidding to be Russia’s second-largest gold miner after Polyus Gold by ramping up production at the Kupol mine in Chukotka Oblast. Kinross acquired the mine in February 2007 when it bought Bema Gold. Kupol is 25% owned by the Chukotka government.
New media for snobs
Snob Media, backed by Russia’s fifth-richest man, Mikhail Prokhorov will launch in September. The project encompasses a virtual club built around a social networking and blog web site for successful professional people, a glossy magazine and an evening-only TV station on a pay-TV cable channel. 4,000 people have responded positively to invitations inviting them to join Snob.
Euroset reduces foreign operations
Euroset, the cellular phone retailer, has closed its 24 outlets in Uzbekistan. Last year, Euroset withdrew from Azerbaijan six months after starting operations there. Euroset president Alexei Chuikin said the operator might also withdraw from Lithuania, Latvia and Estonia, which prefer the Western mode of doing business, where operators sell mobile handsets and contracts without intermediaries (dealers). Euroset’s withdrawal from the Baltic countries will cut its foreign revenues to 6% from 10%, Chuikin said. Euroset accounted for an estimated 34.8% of mobile phone sales in Russia in 2007 and expects its sales to grow by 8%-10% in 2008.
Transport overhaul is now top priority for Russia
The boring world of roads, bridges and railways is now top priority for Russia, with Prime Minister Vladimir Putin in May approving a $570 billion, seven-year transportation infrastructure program, and the largest investment project since the Soviet collapse. It envisages 17,000 kms. of new roads, 3,000 kms of new railroads; work on over 100 airport runways and boosting port capacity to 400 million tons of cargo a year. The Moscow Times in a June article warned that the cost of the project is expected to reach at least $1 trillion before it is completed. Part of that will be met by private finance through Public Private Partnerships (PPP’s) for toll roads and bridges.
Kazakhstan to join Russian-Belarus customs union
Russia, Belarus and Kazakhstan will set up a common customs space in the first half of 2010, said Tair Mansurov, Secretary General of the Eurasian Economic Community (Eurasec). Belarus was the first among the Customs Union’s member states to ratify the set of documents for setting up the common customs space within Eurasec. Its parliament endorsed the 13 documents related to the foundation of the Customs Union. This year, work will be completed to develop a united customs tariff for the three states. Also this year, a Customs Union commission will be established. It will comprise deputy prime ministers from all the member states. At present, Russia, Belarus and Kazakhstan are the only Eurasec member states working to set up a Customs Union. Eurasec consists of Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan. Armenia, Moldova, and Ukraine have observer status.
$1 trillion to be spent on infrastructure
Russia is forecast to spend $1 trillion on upgrading its dilapidated infrastructure until 2020. As a result of the 1990’s upheaval, the country found itself behind the likes of China and India in the renovation of its national infrastructure. Now, hedge funds and investment banks are taking an interest.
The Artradis Russian Opportunities Fund was up 81% in 2007,compared to a market rise of 16%. The fund’s Martin Diggle says funds such as his make an infrastructure play several ways: “You can go direct, such as by investing in Transneft, or port companies. Indirectly we look at firms that make components for hydro-electric plants. Iron ore plants, and coal and coke are other ways of getting involved.”