#9 - JRL 7255
July 18, 2003
BILLIONS FLEEING RUSSIA
Market hopes fading for a favorable outcome to the YUKOS incident
Author: Alexei Yefimov
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
THE RUSSIAN STOCK MARKET LOST $6 BILLION ON MONDAY, AND ALMOST $4 BILLION MORE FOLLOWED YESTERDAY. RUSSIAN SHARES ABROAD ARE BEING SOLD OFF FAST. IT SEEMS THAT EVEN THE DEAL BETWEEN TNK AND BRITISH PETROLEUM IS IN JEOPARDY.
Mikhail Khodorkovsky's return and Arkady Volsky's futile audience with President Vladimir Putin were the deadline. The situation on financial markets resembles panic. According to Angelika Genkel, an expert with the Alpha-Bank, "investors' negative attitude towards the political and economic trends in Russia has taken shape. The statement of business leader Khodorkovsky on the upcoming wave of capital flight from Russia has immediately provoked the withdrawal of the first billions."
Genkel estimates Monday's losses on the Russian stock market at $6 billion. Almost $4 billion more followed yesterday. Russian shares abroad are being sold off fast.
It seems that even the deal between TNK (the Tyumen Oil Company) and British Petroleum is in jeopardy. According to Arkady Volsky of the Russian Union of Industrialists and Entrepreneurs, several days ago he was approached by the British ambassador, who wanted to know whether British Petroleum should pull out.
"What is being done to YUKOS is costing Russia dearly," Viktor Vekselberg of TNK said in Yekaterinburg yesterday. (This was Vekselberg's first statement on the subject.) What Vekselberg meant by that came down to this: should the deal with British Petroleum be called off, that would cost Russia several billion dollars and permanently ruin its investment attractiveness.
Analysts consider foreign investors' behavior justified. Sources at the Aton company for example say that "capital flight will be only logical if the worst suspicions concerning revision of the outcomes of privatization of the 1990s are confirmed." Specialists at the Veles- Kapital company confirm the alarming reports on capital flight. "Some Western funds have already withdrawn considerable sums of money from the Russian market," a source said. "As things stand, we view investment in foreign currency as the only acceptable alternative to investments in shares," Genkel added. Consequences of this practice are fairly predictable - the ruble will fall against the dollar.
The Rosneft state oil company released a statement too. In fact, it paid Interfax to have its press release published. No one can explain why Rosneft would want to pay to have its opinion known to the public. Unfortunately, the press release essentially came down to self-promotion, and can therefore be disregarded.