From: Ian Hague ihague@fbird.com
Subject: Re: 2007-#164-Johnson's Russia List/Petro
Date: Mon, 30 Jul 2007
I feel the need to offer a correction for a statement that appeared in Nicolai N. Petro's Op-Ed piece entitled "Russia and Britain: Condemned to Cooperation?"in www.opednews.com, July 27, 2007 (JRL #164).
Dr. Petro views the recent arrival of Russian companies on Western financial markets (in particular London) as conferring leverage to the Kremlin in its diplomatic struggle with the UK to prevent the . In Dr Petro's words:
"London has become the preferred watering hole for a new breed of Russian global investors. Almost overnight they have catapulted it into third place among the world's stock market, and they appear willing to invest much more, so long as they still believe that the British can be taught to appreciate the benefits of an interdependent global economy, increasingly driven by Russian wealth. If London perseveres as a financial power center into the next decade, it will be largely thanks to Russian investment."
While listings of Russian corporates in London do represent some very nice fee income for all of the service providers (investment banks, accountants, lawyers) that are involved in the process of listing a company in London, this is not "investment" per se. Companies like Vneshtorgbank, Rosneft, Gazprom, have all been large SELLERS of shares to international investors like myself. Over the last two years something close to $40 billion has been raised from private investors in this manner. The reason Russian corporates like London is that they get the broadest possible cross-section of institutional investors who are capable of writing "big-tickets" in the 10s of millions of dollars, together with the relatively more relaxed listing requirements of the LSE.
The upshot of all of this is that in fact it is the UK government that has significant leverage over the Kremlin in the diplomatic battle for justice in the Litvinenko assassination case, and not the other way around. Russian companies need access to liquid reputable capital markets much more than the UK or the LSE "need" to have Russian listings. This is why many in the Kremlin are probably very concerned about the latest escalatory move by Britain to tighten visa rules for Russian government officials: every single major state-owned company in Russia has a Kremlin insider on its board or in the Chairman's seat now. If these people were to lose the privilege of visiting London, they would not be able to preside over the "road shows" that are an essential aspect of the listing process.
Ian Hague
Firebird Management LLC
152 West 57th Street
New York, NY 10019.