Global Investing

from MacroScope:

Emerging Europe property revival

People packing their bags and flying out to St Petersburg, Warsaw, and Prague this summer may not just be seeking an exotic vacation spot.

International property investors are inching back to emerging Europe, lured by prospects of higher returns in markets such as Poland, whose economy has held up relatively well in a global downturn, and Russia, which is bolstered by rising crude oil prices.

After posting strong growth for over 5 years, commercial real estate investments in emerging Europe had been a washout after Lehman Brothers’ collapse in Sept ‘08, with first quarter sales hitting a record low.

As our Moscow-based property reporter Yuliya Komleva and I wrote , major property fund managers such as Germany’s DekaBank, UK’s Aberdeen, and Hines from the United States have again looking for big buys in the region, although Hungary, Ukraine and the Baltics remain largely no-go zones.

Aberdeen Property Investors’ managing director for Russia, Charles Voss, even compared Russian cities favourably against London, where the once-booming UK financial services industry has been weakened by the global financial crisis.

Britain and Russia share wisdom

As London slowly got back to work after the heaviest snow in nearly two decades paralysed the capital’s transport system, the Lord Mayor of London thanked Russian Finance Minister Alexei Kudrin for his perseverance of having to trek to the Guildhall in the snow on Wednesday.

“One of the things London can learn from Russia is how not to be disrupted when there is snowfall,” the Lord Mayor — whose role is to support the City of London as one of the world’s leading international finance centres — told a news conference.

Later, Kudrin — who had a marathon four-hour speaking engagement — cited Russia footballer Andrei Arshavin as an example of the skills Russia (St Petersburg) can offer to London.

Top Gun economics

It’s not often that economists turn their attention to military hardware, but Deutsche Bank has done just that in its latest world outlook. The subject is aircraft carriers and what it sees as the strange desire among a number of countries to build them.

Russia has suggested it may build up to six carriers, DB notes, while China plans one and Britain and France three between them. Like the true economists they are, DB first questions the need, saying such boats are vulnerable, make no sense for coastal defence and are for projecting offensive power over long distances. Then comes the cost:
  

To build a serious aircraft carrier costs well above $5 billion. But then you need to build half a dozen escort vessels and the aircraft to produce a battle unit that will require upwards of 10,000 sailors. Since it is for distant power projection, to keep a single aircraft carrier group on constant deployment requires at least two and more likely three groups.”

Will Spain face Russian ire for snubbing LUKOIL’s Repsol bid?

If Lithuania’s experience is anything to go by, Spain may regret its declaration that it would rather Russian oil company LUKOIL did not buy a major stake in its largest refiner, Repsol.

  

Russian oil company LUKOIL is in talks to buy around 30 percent of Repsol, one of Western Europe’s five largest non-government controlled oil companies by market value, sources close to the matter say. Analysts think the move could be a prelude to a full takeover, which would be the largest overseas acquisition by a Russian company.

 

Spain‘s Interior Minister Alfredo Perez Rubalcaba said on Tuesday he would prefer a different buyer. Rubalcaba didn’t say why LUKOIL was persona non grata in Madrid but analysts think the company’s nationality is the reason.

Will invasion of Georgia steel EU into kicking its addiction to Russian oil and gas?

As George Bush might say, the EU is addicted to Russian energy. While no member wants to kick the habit totally, Brussels would like the bloc to reduce its growing dependence.

Even before Moscow invaded Georgia, the main non-Russian route for exporting Central Asian and Azeri crude and gas to Europe, the EU watched Russia’s regular cuts in energy supplies to neighbours with concern.

But EU members have been reluctant to take the hard measures that would allow them to bypass Russia, so analysts think their reliance on Moscow will grow.