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46 Opinion
Will equity investors pull out?
Will the dedicated foreign-based Russia equity investors,
like my US fund manager friend, pull out if Calvey stays in jail? Probably not. The outcome would probably see some of BVCP’s clients redeem their investments; Browder’s Hermitage Capital Management, once the largest fund in Russia, was effectively destroyed by Browder’s problems.
Investing in Russian equity has always been a rollercoaster ride. Another famous fund manager (who doesn't like to be quoted) quipped that Russia’s equity market is always the best performing in the world – or the worst.
MOSCOW BLOG:
US threatens new round of sanctions but Russia is ready
Gunter Deuber of Raiffeisen Research in Vienna
Sanctions are back. There were four rounds of sanctions in 2018 that clearly did a lot of damage to Russia’s business and investment case, but ultimately they failed to produce their advertised goal: force the Kremlin to change its aggressive ways.
As the year came to an end, there was a hiatus as the last round of new “crushing” sanctions, due at the end of last year, were postponed due to the US mid-term elections. This week the US government has picked up the ball again and is revving up to target more oligarchs and leading Russian companies in retribution for interfering in the 2016 elections and Russian aggression in the Sea of Azov in November.
Five US senators from both parties announced that they had submitted a bill called the Defending American Security from Kremlin Aggression Act (DASKA). It is intended to increase economic, political and diplomatic pressure on Russia “in response to its interference in democratic processes abroad, its disastrous influence in Syria and aggression against Ukraine, including the incident in the Kerch Strait,”
the Senate Foreign Policy Committee said in a press release.
Toughest so far
These are the toughest sanctions of all proposed so far, said Repub- lican Senator Lindsay Graham: “Our goal is to change the status
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It is hard to see how any more damage could be done to Russia’s investment case following, but not limited to,
the Browder affair or the fate of Yukos owner Mikhail Khodorkovsky. But there is so little being invested already that the blip caused by the Calvey affair probably won’t be enough to move the needle. Russia’s equities already trade on a special “Russia discount” that comes on top of the regular emerging markets discount, to account for problems like the political risk and poor corporate governance. All Calvey’s arrest says
is that Russia is a very risky place to invest and things can go badly wrong, no matter how hard you try to keep your nose clean. But we knew that already.
The US government's new sanctions legislation caused a sell off, but Russia has been preparing for the fight.
quo and introduce significant sanctions and measures against Putin’s Russia. He must stop interfering in the US electoral process, stop cyber attacks on American infrastructure, withdraw Russia from Ukraine and stop efforts to create chaos in Syria. ”
Western diplomats, especially those in Europe, have been disappointed in particular by the Kremlin’s refusal to release sailors from three Ukrainian naval ships. They were arrested during a naval clash between Russian and Ukrainian ships on the Sea of Azov on November 25.
The ruble and equities tanked on February 13 as news broke that the US Senate had introduced new sanctions legislation due to be heard soon.
Amongst the points mentioned in the bill are sanctions:
• against Russian banks supporting Russian actions to undermine democratic institutions in other countries;
• in relation to investments in Russian LNG projects outside Russia;
• in relation to the Russian cyber industry;
• against Russian government debt;
• against politicians, oligarchs, family members and other
individuals who directly or indirectly contribute to illegal and corrupt activities in the interests of Putin.