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Russian capital markets: Climate change

Russia’s underdeveloped capital markets are on track for much-needed modernization. However an arcane legal system and entrenched attitudes could yet put a brake on the pace of reform. Lucy Fitzgeorge-Parker reports.

WHEN RUSSIAN PRESIDENT Dmitry Medvedev announced on March 30 that ministers would have to step down from the boards of state-controlled companies within four months, it prompted a flurry of speculation. Was it part of the purported power struggle between Medvedev and his mentor, Vladimir Putin, ahead of next year’s presidential election? Was Medvedev flexing his political muscle by replacing key Putin ally Igor Sechin – the first to quit – as chairman of Rosneft? Or was the guiding hand in fact Putin’s, punishing his associate for embroiling him in the BP-Rosneft debacle?

Few paid any attention to Medvedev’s claim that the move was intended to improve the investment climate. Given the perennial disconnect between rhetoric and reality in Russia, such scepticism is unsurprising – yet there are signs that, for once, the cynics might be wrong. Over the past 12 months, the regime’s public commitment to appeasing investor demands may have wavered – depending on who was speaking and who was listening – but its actions appear to demonstrate a genuine appetite for reform.

The detente between politicians and the international business community began last spring, when Medvedev revived a project – first mooted in 2008 but shelved following the financial crisis – to transform Moscow into an international financial centre, and recruited a cadre of high-profile bankers for a working group tasked with devising a list of essential reforms.

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