29 июня 2016 г.


FDI in Russia Has a Future Regardless of Geopolitics


Sanctions were the key theme at Russia's most important finance event of the year, the 2016 St. Petersburg International Economic Forum. At one of its sessions Paul Smith, CFA Institute’s president and global CEO, presented a study entitled “Geopolitics For Investors”.


This study is intended for investors who want to better evaluate the influence of geopolitics on markets and price formation. An era of “cold war” and “mutually ensured destruction” doesn’t mean that one cannot make good investments. In Tunisia during the Arab Spring, there were a record number of IPOs (all successful) and only a year after that (or thanks to that) there were radical changes in administration, as shown in the study. Geopolitical tension doesn’t rule out good investments, but unawareness of geopolitics can negatively affect financial results.

Paul Smith shared with his colleagues at SPIEF his observations from a trip to Vietnam. He visited the country after U.S. President Barack Obama, who had drawn a whole crowd of supporters. Obama is very popular there, regardless of last century's armed conflict in Vietnam. The moderator of the session, Russia Today presenter Peter Lavelle, pointed to the rise in Russian President Vladimir Putin’s popularity domestically, which followed the imposition of sanctions and the strengthening of Russians’ patriotic sentiment.

During the SPIEF discussion, special attention was paid to Russia’s geopolitical risks. The long sanctions (28 months) have led some foreign companies in the finance and oil and gas industries to freeze their projects in Russia, as Artem Volynets, CEO at SAPINDA Eurasia explained, citing an analysis of 50 large companies operating in Russia. According to him, international companies in the pharmaceuticals business (in which there has traditionally been more confidence than in local ones), as well as local players in the retail and agricultural markets have, in fact, been able to strengthen their positions. “Besides enterprises in the energy and financial services industries, other companies have increased their market share, and the demand for their products has grown.” As Volynets summarized it, “There has been no large-scale exit from Russia. Rather, investment continues.”

Lavelle believes that it is first of all Europe that is suffering from sanctions, as it is losing the Russian market due to import substitution. The countersanctions have demonstrated that there are tools that Russia can use, added Benjamin Wegg-Prosser, managing partner at Global Counsel LLP.

“If we don’t consider the effect on businesses, the sanctions as an attempt to pressure the country have had zero results,” claimed Jean-Pierre Thomas, president at Tomas Vendome Investment. Benjamin Wegg-Prosser disputed this, saying “I don’t believe that sanctions don’t work. There is the example of South Africa in the 1990s, the example of Iran. These countries changed their way of doing things as a result of prolonged sanctions.”

The majority of financiers believe that sanctions harm the economic system not only of the country they are targeted at, but also have an effect on the whole world. “There has been discussions about excluding Russia from SWIFT,” said Lavelle. “But that would turn the whole global economy off.”

Concluding the discussion, Lavelle shared some backroom conversations about how someone from the White House had been calling American companies to remind them of limits on investing in Russia. Nonetheless, many American investors attended SPIEF and are working “in the field”. “One gets the impression that the sanctions are not really so bad,” said Lavelle.

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