I see broader reasons based on the world’s economic fears. What is disturbing is that a substantial portion of this capital flight is coming from middle class businessmen who are reportedly packing their bags and taking planes to Vienna, Berlin, London and Paris with the intention of establishing businesses there as corporate raiders in Russia are putting the squeeze on their activities from contracting to telecommunications.
Heading to Peking on Tuesday in his first foreign trip since unveiling his bid on 24th September to reclaim the presidency, Russia’s most popular politician, Prime Minister Vladimir Putin will wrangle over a gas supply contract worth a potential $1 trillion underlining the increased belief in Russia that China will soon replace the United States as the world’s leading economic power.
Russia’s eastward turning is also reinforced by the priority foreign policy initiative revealed by Mr. Putin in “New Eurasian integration project: a future that begins today” a front page article in Izvestia. The project is based on an expansion of the Customs Union of Russia, Belarus and Kazakhstan into a Common Economic Space effective 1st January 2012. This will evolve into a Eurasian Union which will emulate the European Union. While Mr. Putin stresses the project is open to all former Soviet states the first to signal they will join are Kyrgyzstan and Tajikistan. Moldovia has said no and Ukraine is resisting joining the Customs Union, putting its faith in the European Union.
The key to the Eurasian Union’s success is its opening of freight transit routes from Europe to the Pacific of which the daily BMW parts train from Leipzig to Liaoning province in China is the most recent example while the Northern Sea route powered through the winter by a fleet of icebreakers is another indication of Russian trade and logistics integration with the ASEAN countries.
It is clear that Mr. Putin has long planned a return to the presidency and that after four years as Prime Minister dealing with the intricacies of daily government he is better experienced for the task. His confidence is unabated and his optimistic pronouncements at the VTB Capital, “Russia Calling” investment forum that Russia was better prepared for any economic shocks than 2008 were well received.
But back to London, where we are being fed a diet of revelations about the venality of the Yeltsin era through the testimony of Boris Berezovsky, the self-exiled Russian tycoon who is claiming $3.5 bn from his fellow oligarch, Roman Abramovich in the London High Court.
The turbulent markets and wary investor sentiment has caused up to ten Russian companies who had planned IPO’s to postpone. So the good news for the London Stock Exchange is that Polymetal, kicked off the listing plans earlier this month announcing the switch of shares from Russia to London and the mining group would raise $500m in the process. The driver is access to the capital markets and shareholder liquidity, with one eye on acquiring finance-starved mining projects in the former Soviet Union. The company starts trading in London on October 28.
Another fillip was the inward investment mission for Russia’s largest region, the resource-rich Sakha Republic (Yakutia) led by the republic’s President Yegor Borisov. They picked London as the first European destination of their road show. A ground-breaking presentation at the London Stock Exchange before the start of trading and the ringing of the bell by Mr. Borisov led to a meeting with the Lord Mayor of the City of London Alderman Michael Bear and a slick and professional presentation, broken by cultural interludes, in Burlington House Piccadilly to 150 businessmen.
In the evening a sumptuous reception in the residence of Russia’s ambassador, Alexander Yakovenko spilled from the ground floor reception rooms down the steps to the garden. The evening’s speeches were also paced with cultural interludes and as Mr. Borisov introduced the striking 22-year old Zarina Koyrina a dancer, ethno singer who drew on Shamanistic rituals of the ethnic peoples of Yakutia Ambassador Yakovenko whispered to me that she was “very dangerous” and while he was obviously referring to the reputed magical properties drawn from the spiritual world that shamans possess I felt the real danger was the pull this lithesome girl, speaking fluent English had on the assembled audience.
To cap it all Mr. Borisov invited anyone present to come to Yakutia and live and prosper.
It was enough to make some present, at least momentarily, to forget that Yakutia, 40% of which lies within the Arctic Circle, has a nine-month winter with temperatures dropping as low as minus 70 Celcius.