Russian economy: The flight of the Russian phoenix
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Russian economy: The flight of the Russian phoenix

In August 1998 the Russian economy looked like a busted flush. Yet less than a decade later it’s the ace in the hole for investors looking for a hedge against a US-inspired global recession. Guy Norton looks at the reasons for its recovery.

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AS COMEBACKS GO it surely ranks alongside that of Lazarus. In the wake of August 17 1998, when Russia effectively defaulted on tens of billions of public and private sector debt, the country’s economy certainly looked dead and buried as far as both strategic and portfolio investors were concerned.

Yet less than a decade later, Russia is widely seen as a must-go-to destination for a wide range of investors, both big and small. It has been a remarkable reversal of fortune by any stretch of the imagination and one that even avowed Russophiles still struggle at times to comprehend.

Willi Hemetsberger, head of global markets at UniCredit Markets and Investment Banking in Vienna, admits: "At the time it was hard to see how Russia would get itself out of the crisis." Few people can have had such a baptism of fire as Hemetsberger, who joined Bank Austria Creditanstalt, now part of UniCredit Group, the day that the Russian government gave up the fight to defend the rouble and pay back tens of billions of rouble-denominated government bonds.

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