For example, the Russian government has been far more fiscally prudent than many Western countries, taking advantage of high oil prices to create a fiscal fund that by the end of 2008 held a combined $225bn, much strengthening the nation's public finances.
And, the authors note, while the US provided the capitalist model, it is China that will soon be Russia's largest trading partner – and together these two economies may grow to dominate the twenty-first century.
At the same time, the authors caution that Russia’s economic outlook is far from secure, especially as it remains alarmingly dependent on the oil price and further progress is stymied by systemic corruption.
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The editor of the book, Peter Westin, is Chief Equity Strategist and Economist for ATON, Russia's oldest independent investment group. Like many of the contributors to this book, he has lived and worked in Russia for much of the past 20 years, not only bearing witness to that country's remarkable economic transformation but participating in the dynamic capital markets that sprang from almost nothing. The other contributors are Ben Aris, Rebecca Baldridge, Fred Berliner, Arnab Das, Steven Dashevsky, Peter Elam Hakansson, Johan Elmquist, Natalia Gurushina, Peter M. Halloran, Andrew Risk, Andrey Shemetov, Bernie Sucher and Mattias Westman.
More details on the book follow below.
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What is the biggest economic story of our time? The collapse of Lehman Brothers and the near-meltdown of Western capitalism? China's continuing growth and its imminent status as the world's number one economy? Or Russia's economic renaissance since the end of the Cold War?
There is no simple answer, of course, because these stories are still being told and because no economic story unfolds in isolation. That said, the fact that Russia's transformation from central planning to a market-based economy even ranks as a contender is impressive.
There will be more surprises in store, especially given that few countries are as poorly understood as Russia. While the US provided the capitalist model, it is China that will soon be Russia's largest trading partner – and together these two economies may grow to dominate the twenty-first century.
Just as the West is already having to revise its image of China as a place of cheap labour and low innovation, so Western observers should move beyond the clichés of Russia as a place ruled by oligarchs, soaked in vodka and mired in Soviet-era decay.
But whom should we trust to tell us the truth about the modern Russian economy? There is no shortage of pundits with opinions, but one group of professionals have put their money and their careers on the line and invested in the nuts and bolts of the Russian transformation.
Among their number are the contributors to this volume, which comprises essays by some of the world’s most successful Russia- dedicated portfolio managers, economists and analysts.
Both foreign and Russian, they share their personal experiences of living and working in Russia, some since the inception of the market in the early 1990s. Finance professionals by trade, their backgrounds extend to academia, journalism and US aid programmes, and they provide a unique range of expertise for examining the road ahead.
For many market participants – and for some of the essayists collected here – Russia has been one of the best investment opportunities of their lifetimes. Who would have believed that, in the wake of the 1998 ruble crisis, the Russian economy would recover so quickly?
Since 1999, nominal GDP has expanded close to 10 times, and Russia’s equity market rose by almost 50\% per year on average between 1999 and 2011.
Although political risk resurfaced recently, for most of the last 13 years economic prosperity has been accompanied by a certain degree of political stability.
While a rising oil price has undoubtedly been a vital accommodating factor, one should recognize that the Russian government took significant strides toward saving for a rainy day, creating a fiscal fund that by the end of
2008 held a combined $225bn and currently $150bn, and strengthening Russia’s national finances. These moves have been instrumental in rebuilding Russia's credibility on the international scene.
Precisely because the economic transformation over the past two decades has been so dramatic, and because that journey has been far from smooth, the Western press has had no shortage of torrid headlines – although few focusing on the positive economic achievements.
Political stories have often come first, of course. To outsiders on the other side of the world, however, these stories can sometimes be too easily separated from underlying economic development. The contributors to this volume have had to deal with all aspects of Russian life, including pursuing shareholder rights in the courts and pushing for changes in the law.
They detail the rocky progress in corporate governance in Russia, advocating the importance of a presence on the ground – a fundamental lesson for investing in emerging markets. There is no room for complacency, and they caution that Russia’s economic outlook is far from secure, especially as it remains alarmingly dependent on the oil price and further progress is stymied by systemic corruption.
Each chapter offers a clear historical description of the principal developments, while the personal touch enhances the reader’s understanding of how market forces developed.
The authors recount their travels around Russia on rickety airplanes, company visits that seemingly took them to the edge of the known world, the formation of formal insider trading laws, and finally the double-edged sword of buoyant oil prices, which may threaten the economy’s long-term development. Russia’s capitalist pioneers have much to recount.
Since the Soviet Union’s collapse in 1991, Russia has made enormous strides towards creating a free market. In just over 20 years the economy has been completely transformed. Today, most Russian companies have been privatized and the nation has developed fully functioning capital markets.
Indeed, over the course of the past two decades, the Russian equity market has on several occasions been the world’s best-performing stock market.
While the country’s leadership faces many challenges ahead, the progress of the last 20 years has not been widely recognized in the West and this book goes a considerable way towards redressing the balance.
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CONTRIBUTOR LIST
Ben Aris, editor/publisher of Business New Europe and an Eastern Europe specialist
Rebecca Baldridge, writer and independent consultant
Fred Berliner, formerly hedge fund principal with Argot Partners
Arnab Das, managing director of market research and strategy at Roubini Global Economics
Steven Dashevsky, founder of Dashevsky & Partners investment boutique
Peter Elam Hakansson, founder and chairman of East Capital
Johan Elmquist, equity portfolio manager and co-founder of Tundra Fonder
Natalia Gurushina, director of emerging markets strategy at Roubini Global Economics
Peter M. Halloran, CEO of Pharos Financial Group
Andrew Risk, equity strategist covering the Russian market at ATON
Andrey Shemetov, CEO of ATON
Bernie Sucher, non-executive director responsible for strategic development at ATON
Peter Westin, chief equity strategist and economist at ATON
Mattias Westman, founding partner of Prosperity Capital Management
