By Jason Bush The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

MOSCOW — Gazprom, the Russian gas group, may be seeking to buy a major stake in RWE. A deal could potentially shore up the shaky finances of Germany’s second largest electricity producer, and boost investment in the country’s power sector. But it would also raise serious competition concerns, and increase Germany’s reliance on expensive Russian gas.

Neither firm has confirmed the rumour, but Gazprom has recently made no secret of its desire to make major investments in the European electricity sector, especially in Germany. Gazprom has long dreamed of acquisitions that would bring it closer to end-consumers. Its interest in Germany’s power market also reflects its eagerness to fill the hole resulting from the accelerated phase-out of nuclear power plants. Gazprom reckons that Germany needs to invest 10 billion euros to build gas-fired replacements — and is more than happy to lend a helping hand. That, of course, would increase Germany’s future demand for Russian gas.

From RWE’s point of view, a big investment from Gazprom would help address financial woes that have seen its share price plummet by 28 percent year-to-date. Heavily-endebted RWE is struggling to fund an $18 billion capital investment programme in greener power generation. A strategic investor such as Gazprom could help shoulder the costs.

But it’s a bigger question whether a deal also makes sense for Germany. There’s a risk that with Gazprom as a strategic investor, RWE may not treat other suppliers even-handedly. In any case, Germany needs to be cautious about any deals likely to increase reliance on Russian gas, which already accounts for 40 percent of German consumption. It’s no coincidence that Germany’s average gas price is among the highest in Europe – double the level for industrial users of the more competitive UK market. Gazprom’s major European customers, including RWE, are losing patience with Gazprom’s stubborn insistence that contract prices remain linked to soaring oil prices.

Perhaps a quid pro quo is in the works, whereby Gazprom would bend over price, in return for being accepted as an investor? There has been little indication so far that Gazprom has changed its mindset. It continues to resist significant changes to its inflexible pricing formula.

That means Germany’s energy companies and their investors should ask whether it is really in these firms’ long-term interests to develop closer ties with such a difficult partner. Competition regulators, meanwhile, should give any tie-up close scrutiny.

By Jason Bush The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The $14 billion rescue of Bank of Moscow shows that something must be badly wrong with bank supervision in Russia. The bailout amounts to almost half the assets of the country’s fifth-largest bank. Reforms are urgently needed. But new laws alone won’t eradicate the cronyist culture at the root of the mess.

Officials say the record bailout is needed because the ex-management of Andrei Borodin, an ally of disgraced Moscow mayor Yuri Luzhkov, blew billions of dollars by lending it to companies affiliated with management – or simply siphoned it offshore. Borodin now lives in exile in London.

While the scale of the losses is astonishing even by Russian standards, the underlying causes are not. The debacle comes just months after the collapse of another politically connected bank, mid-sized International Industrial Bank, exposed similar lapses in regulatory oversight. In typically complacent fashion, most analysts dismissed that bank’s collapse as a one-off.

In fact, the risky related-party lending in which both banks engaged is commonplace. Last year, ratings agency Moody’s estimated such loans at around 10 percent of the sector total and 50 percent of bank capital. This is allowed by current Russian regulations, and is twice as high as what’s practiced in the Middle East, or five times higher than in Central Europe. One obvious lesson is that Russia needs to introduce tighter restrictions on such lending. Loans to related parties are typically restricted to 20-30 percent of tier one capital in western Europe.

The debacle also underscores the urgency of proposed new rules that would give the central bank greater powers to investigate companies that are affiliated to banks, and make bank shareholders liable in the event of asset stripping.

But new rules will mean little unless they are enforced. This will long be the main problem in Russia. Russian bank failures usually have political causes: well-connected banks often have more clout than regulators. In this respect, the recent expansion of state banking giants, such as Kremlin favourite VTB, may ultimately make matters worse. Russia’s latest banking fiasco is unlikely to be the last.

By Jason Bush The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

MOSCOW — Russian IPOs face a tough sell among international investors, who know from experience they tend to be over-priced. But the strong showing of the latest one, by Global Ports, suggests that Russian issuers may be getting the message at last: to overcome well-founded investor scepticism, Russian IPOs need be priced at an attractive discount.

Not only has the Russian ports operator managed to pull off its $588 million IPO at the height of Greece-related market turmoil, but the performance has been impressive. At the close of the first day’s unconditional trading on June 29, the share price was up 18 percent on the offer price.

That’s highly unusual for a Russian IPO. True, search engine Yandex was an even bigger hit last month –- but that says more about internet fever than love of Russian IPOs. Out of thirteen Russian listing attempts this year, seven have been pulled. Of the six that got away, only Global Ports and Yandex are now up on their IPO price.

So what made Global Ports different? It helps that the company, which owns five container terminals and an oil terminal, has a fast-growing business –- Russia’s underdeveloped container market has risen by 18.6 percent per annum over the last decade. It also helps that the owner, transport conglomerate N-Trans, has already pulled off two successful IPOs in the railway freight and road building segments, both of which are presently up over 30 percent on their issue price.

But even with these pluses, the offering wouldn’t have been a hit if it had fallen victim to the normal Russian curse –- a greedy valuation. Global Ports and its bankers appear to have got the message that investors require decent upside. The $2.3 billion capitalisation implied by the IPO price was 25 percent below the $3 billion analysts’ estimate. And the company’s enterprise value stood at 8 times 2011 forecast EBITDA, compared with a multiple of around 13-14 times for other emerging market port operators.

Whether Global Ports’ success represents the start of a trend towards realistic pricing by Russian companies remains to be seen. The most recent Greek crisis may have dampened temptations to be greedier. But at least it’s no longer just internet stocks that can break the Russian IPO curse.

By Jason Bush The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Russia seems unable to stem ever-increasing capital outflows. Official statistics show these amounted to $43 billion during the six months to March, and a further $7.8 billion in April. Officials are puzzled. They should be worried.

In theory, the recent rise in oil prices ought to be drawing more investment into Russian assets. But according to one school of thought, higher oil prices may in fact have contributed to the capital flight: Russian oil companies park part of their profits abroad. Yet official statistics show that delayed repatriation of profits — $7 billion in the first quarter of the year — is no higher than normal, casting doubt on this theory.

Another, relatively benign, explanation is rouble liquidity. Over the past year Russian companies were able to borrow roubles at relatively cheap rates, making it advantageous to use local debt to pay off foreign debts or fund foreign acquisitions. This explanation falls a bit short: in recent weeks domestic liquidity has tightened, interest rates have risen — and the capital outflow has intensified.

Some Russian officials put forward yet another reason: political uncertainty, since no one knows whether President Dmitry Medvedev or Prime Minister Vladimir Putin will occupy the Kremlin after the 2012 presidential election. It may be that some business groups fear a change in the balance of power, or the possibility of conflict within the elite. Yet previous elections weren’t accompanied by capital outflows on such a scale, and it’s not obvious that either leader has major surprises in store.

In reality , Russia’s poor investment climate may be the best explanation, and the most disturbing. The outflows coincide with dwindling domestic investment. Capital expenditure actually fell by 1.5 percent in the first quarter, compared with a year earlier, and it remains 9 percent below its pre-crisis level.

But why would investors suddenly notice that Russia is a dicey place to put their money? It may be that their behaviour reflects anticipated returns as well as risks. Economic growth, forecast at just over 4 percent this year, has halved since before the financial crisis. Meanwhile, a recent hefty rise in payroll taxes has added to the burden on business. Further tax hikes are inevitable, with rival government factions now bickering over the details.

By Jason Bush and Fiona Maharg Bravo The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

MOSCOW/MADRID — No compromise is pain free. But BP’s peace agreement with its oligarch partners could have been much more costly. The UK oil major seems to have killed their opposition to its Arctic exploration alliance with Russian energy giant Rosneft — but without resorting to penal concessions.

The key to the compromise is that TNK-BP, the UK group’s joint venture with the oligarchs, will replace BP as Rosneft’s partner in the Arctic project. At the same time, BP will still be allowed to proceed with a proposed share swap with Rosneft — albeit on restricted terms. As BP owns 50 percent of TNK-BP, BP can still look forward to future upside from the exploration of the Arctic, a valuable source of long-term growth.

True, BP is only benefitting half as much as before. But that is better than nothing. The fact that BP may still proceed with the share swap is regrettable given the drilling opportunity is now smaller. But it would have been even more damaging to BP to back out of that and risk damaging relations with Rosneft.

This should take some pressure off BP Chief Executive Bob Dudley. Critics will still ask how he got BP into the mess to begin with. Nevertheless, the TNK-BP oligarchs have settled for less than they had previously demanded. Dudley has also avoided having to take the really expensive escape route — finding the $35 billion rumoured to be the cost of buying them out.

The final outcome may in fact be close to the one the oligarchs originally hoped for. It makes good sense for them to insist on TNK-BP replacing BP in the Arctic, which helps address concerns about TNK-BP’s future growth, improving its value and their own wealth. The oligarchs have also asserted a vital principle — that BP cannot cut them out of other deals in Russia in future.

BP’s shares rose 3 percent on the news and might have been expected to fare better. But there’s still one big unanswered question. Will Rosneft agree to the compromise? Rosneft had previously scorned the idea of working with TNK-BP, suggesting it wasn’t up to the job. In practice, BP can still supply the joint venture whatever technical expertise is needed. It shouldn’t be too hard to bring Rosneft on board.