Summit Notebook

Exclusive outtakes from industry leaders

Buy a farm in Russia, get more than you pay for

soldatov.jpgThe 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.

AUDIO: Capital flight to cure what ails

pankin1.jpgSoaring oil prices have helped make Russia rich, but the flood of petrodollars means Russians face double digit price inflation. Dmitry Pankin, Russia’s deputy finance minister, sees a trade off in a recent market selloff: Russian companies might have trouble raising capital, but billions of dollars in capital outflows may be just the thing to help cool inflation. 

AUDIO – Fannie, Freddie favour Russia

Russia’s Finance Ministry and central bank have been put on the defensive for investing the national reserves in U.S. mortgage agency debt. Deputy Finance Minister Dmitry Pankin tells the Reuters Russia Investment Summit that Fannie Mae and Freddie Mac were propping up Russia’s finances, not the other way around.

Khrushchev’s legacy lives on Russia real estate market

pisarev.jpgThe chief executive of Russian developer PIK Group sees one guarantee of his future success in an emergency decision made by the Soviet government of Nikita Khrushchev in the 1950s. Back then, tens of thousands of cramped communal flats were unpacked and whole families residing in single rooms were resettled into their own bright and new flats in hastily constructed five story kit buildings which came to be known as khrushchevki. 

“It solved a problem for millions of Soviet citizens but the lifetime of these buildings is coming to an end,” Kirill Pisarev told the 2008 Reuters Russia Investment Summit.  “Over a million square meters of housing are in these khrushchevki, which had a planned lifetime of 20-30 years. Now they are 40-50 years old. They will survive another three, five, seven years maximum.”

AUDIO – Gazprom: Friends in high places

President Dmitry Medvedev is the former chairman of Russia’s state gas export monopoly Gazprom, and the company is viewed as a powerful instrument of the Kremlin’s foreign and domestic policy, but the company’s deputy chief, executive, Alexander Medvedev, says it is not so. 

Even at the height of Russia’s brief war with Georgia over the breakaway territory of Abkhazia, Gazprom was steadily pumping gas to Georgian consumers, Alexander Medvedev said.

AUDIO – Gazprom: “We are mutually dependent”

GazpromA quarter of the gas that heats European homes and powers European industry is piped in thousands of kilometres from the Russian tundra. By 2015, Russia’s share of European gas supplies will rise to at least one third. That powerful lever of influence over Europe’s economy raises the stakes in its confrontation with Russia over its invasion of Georgia.

But Alexander Medvedev, deputy chief executive of Russia’s state gas export monopoly Gazprom, opened the Reuters Russia Investment Summit on Monday with a reminder that even the mighty Gazprom is not invulnerable to Europe and the West, relying as it does on foreign revenue and capital.

Audio – Political interference hurting Russia business

jordan.jpg Boris Jordan, president and CEO of $2 billion investment fund the Sputnik Group, said political interference in business remains a serious concern in Russia.

The government is starting to emerge as a ‘competitor’ against private business in areas such as the oil industry, acting as a brake on development, Jordan told the Reuters Russia Investment Summit.

Audio – Russian mobile growth to outpace economy

izosimov.jpgRussia’s mobile phone industry should continue to outgrow the wider economy for years to come, reckons Alexander Izosimov, CEO of the country’s No.2 mobile phone company Vimpelcom.

Even though the market is nearing saturation point, Izosimov told the Reuters Russia Investment Summit that expanding infrastructure, increasing useage and the growing sophistication of clients will ensure strong growth rates.

Audio – No major acquisitions planned at Rosneft

 obrien.jpg

Rosneft, Russia’s largest oil firm, plans no major acquisitions for now and and its chief focus is on integrating assets is has bought recently, Chief Financial Officer Peter O’Brien told the Reuters Russia Investment Summit.

State-controlled Rosneft has this year snapped up production and refining assets of fallen oil major YUKOS auctioned off by Russia’s receiver. O’Brien, an American, dismissed speculation that Rosneft was interested in Russia’a No.4 oil firm Surgut or midsized player Russneft.

Audio – Rosneft eyes return to Eurobond market this year

obrien.jpgRosneft, Russia’s largest oil company, is considering a return to the Eurobond market after postponing an offering in July due to market volatility, Chief Financial Officer Peter O’Brien told the Reuters Russia Investment Summit.

The Eurobond would be “benchmark” sized, or worth around $2 billion, and Rosneft is looking for a maturity of 5-10 years.

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