Even the rich aren’t as well-off as they were a year ago but that’s not stopping the wealth management industry from focusing on what the future of private banking will look like after the economic downturn has passed. Click below to view my latest story:

Russian banking and aviation magnate Alexander Lebedev, owner of London’s Evening Standard, estimates that Russian bureaucrats have pocketed $500 billion in bribes in the past four years and corruption and red tape make Russia one of the worst places to invest on earth.

On the scale of bureaucratic outrages, Lebedev hit a personal low when the authorities asked him to produce a 100 page report on bee poo. They claimed to be concerned about the excrement produced in the hives at one of his farms.

“The conditions for entrepreneurship in Russia are simply horrible,” Lebedev told the Reuters Russia Investment Summit.

Lebedev has plenty of suggestions how to cure the disease. One of them would be to fire at least half the bureaucrats. “They are wealthy people. Let them go to Saint-Tropez,” he said.

One could wonder how billionaire Lebedev gets away with criticism of the Kremlin while his peers who had dared to challenge authorities had to flee to London or are serving prison terms in Siberia, like the oil magnate Mikhail Khodorkovsky.

Lebedev, a former KGB agent like Prime Minister Vladimir Putin, says Putin is open to criticism and these are mainly mid-level bureaucrats who are causing trouble. “Putin is a hostage to the tradition of a corrupt country,” says Lebedev.

But he says Khodorkovsky must be freed and often repeats “God Forbid” when mentioning other fallen oligarchs.

Perhaps having a critic like Lebedev is valuable for Putin — if the prime minister does launch a fresh crackdown on corruption or major regulatory reforms, he will immediately have a cheering section. And without Lebedev, the Russian corporate landscape would be too dull.

   Russian investment bank Renaissance Capital was a big backer of Moscow’s ambition to become a major emerging-markets financial centre, a bridge between European and Asian capital, a rival to Dubai.

    It not only trumpeted the idea, but was one of the first big local firms to take out offices in a sleek glass skyscraper by the Moscow River, surrounded by foundation pits and towers of naked steel girders that were to become Moscow’s Canary Wharf.

The head of Russia’s oil pipeline monopoly Transneft, which carries over 10 percent of the world’s oil supply to market, takes a charitable view of Russia’s oil output growth. At a time when oil prices are on the slide, and the OPEC group of oil producing nations is cutting production, he thinks energy-rich Russia must keep pumping more to help the world’s less fortunate consuming nations and their economies.

“What about our beloved Fannie Mae and Freddie Mac? We can’t do it (let production stagnate). We have to support them,” he joked.

But he added, on a more serious note:

“In the United States they keep reserves for the future and fields which are ready to produce are being mothballed and are awaiting their time. I believe the state of our finances and budget allow us to think about such a rational approach.”

The Kremlin has been promising for years to root out corruption from Russia’s bureaucracy. President Dmitry Medvedev has vowed to redouble these efforts. In June, the newly elected president’s administration presented him with new anti-corruption legislation and a plan to clean up the judiciary.  

Medvedev’s top economic adviser, Arkady Dvorkovich, speaking at the Reuters Russian Investment Summit, bristled at a reporter’s suggestion that the anti-corruption campaign might start in the top echelon of politics:

 ”You haven’t noticed we’ve started?”

“The change in behavour of bureaucrats is noticeable at all levels. I can tell from my own colleagues there is no longer a casual attitude toward the prospect of a run-in with the law. There is fear and understanding on the part of those who join the civil service that it isn’t a money making tool.

“A few years back it was a mass phenomenon — people came to government service with the aim of making money.  It doesn’t happen anymore. “

Mikhail Slobodin’s Integrated Energy Systems, Russia’s largest private electricity investor, works in a tough industry: Prices for gas are rising, prices for coal are rising more. Russia’s growing economy needs power, and IES has heavy obligations to build new stations at a time when construction costs are soaring and credit is tight. Government price regulation leaves little room for profit.

 And compared to the power industry with its tight finances, the IES chief executive said, his plant personnel can’t help but find the rich neighbours offer more appealing employment.

“Our stations are in big industrial areas. The metals industry is next door and pays its people a lot more. They have an EBITDA margin of 45-50 percent. Uralkali has an EBITDA margin of 75 percent. They can pay their people more. We are losing our own people. It’s really a problem when people on the other side of the fence get 20, 30, 40 percent more.”

You can listen to Slobodin’s remarks in Russian if you click on the link below.

As Russia’s acquisitive corporations have consolidated their positions at home, their ambitions have spread to other fast growing, often risky and untried emerging markets. First they hit the countries of the former Soviet Union, which many Russian businessmen still view as their backyard,  and more recently, have expanded in other emerging markets in Asia and Africa. Particularly hospitable have been the old Cold War allies of the Soviet Union, as Russian mobile phone operator Vimpelcom found when it made its first step in Asia by entering a joint venture in Vietnam.

“It was the real red carpet treatment,” Vimpelcom chief executive Alexander Izosimov said.  

 As part of its Cold War era hearts-and-minds campaign, Moscow welcomed thousands of foreign students who learned engineering, medicine, and at the same time, Russian language and culture.  The students of decades past now regularly meet Russian businessmen on their home turf.

The chief executive of Russian agribusiness company Razgulay, Alexander Soldatov, set out to buy up old collective farms, and ended up with a milk business. The cows just came with the land, he said. 

 Razgulay is investing to expand its land bank, betting that Russia’s arable land will be parcelled out to private owners by the end of 2009. Sometimes, he said, he is able to buy virgin meadow. When he buys a collective farm, it comes with Soviet-era trappings, including an obligatory herd of cows and a command-economy version of a business plan approved by the regional government. The milkmaids — who in contemporary Russia are effectively shareholders in the collective farm — usually come too.

 ”You don’t just buy shares,” Soldatov said.

Razgulay follows the plan and tries to bring in modern dairy technology, he said. But the milk business is as tough in Russia as it is in the west, bringing low margins. He expects no profit on it for three years.

“It’s a burden,” he said.