A SUPPLEMENT TO EUROMONEY/SEPTEMBER 1997
RUSSIA: THE NEXT CHAPTER
Colossus on the road to market
The old guard remains in control at Gazprom, Russia’s dominant gas producer. But can they fend off plans to liberalize the gas sector?
French row blocks Goldman’s gas loan
If an international bank wants to increase its profile in Russia, it heads straight for Gazprom. Russia’s largest company has huge capital requirements for the next few years, and to be seen working on as many of its deals as possible is the best way to market services to other Russian companies.
Muscovites learn to love Luzhkov-onomics
Regional governments are taking back control of local businesses in the name of saving jobs and preventing foreign speculators from taking over. While some observers regard this as an undesirable move, things could be worse. Renationalization, the bogey which haunted Russia’s first few years of market reform, has melted away as the Kremlin moves to sell whatever mineral fortunes it has left. But relocalization is just gathering steam.
The Russian $90 billion promissory note market is the largest debt market in the country. But major reforms are required for it to mature into a mainstream corporate bond market – and yields must remain high or foreign investors will not be willing to take the extra risk.
At the top end, Russian banking still revolves around lucrative government business and political influence. But with T-bill yields falling below 20% this summer and alleged corruption in the banking system, which acts as a surrogate government treasury, Russian banks face some big challenges. Charles Piggott reports on whether the time has come for Russian banks to get their hands dirty doing what their namesakes elsewhere do – lending money.
Russia’s sovereign Eurobonds are still holding centre stage, but the country’s cities, banks and corporates are also stepping into the limelight.
Even pension funds are showing an adventurous streak and investing in Russian equity. A tremendous inflow of foreign capital and an increasing foreign ADR market has made Russia the world’s best performer so far this year and left some fund-managers waiting for a correction.
