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November 2, 2004
Report: Bush Win Is Better for Russia
By Lyuba Pronina
Would the re-election of George W. Bush really aid Russian fertilizer companies? Or a John Kerry administration benefit domestic fixed-line phone providers?
If a recent report from Renaissance Capital is to be believed, that's exactly what will happen.
Although the investment house concedes that the outcome of the election will not have a significant impact on the Russian economy, Renaissance ventures to predict in a recent report that Bush's re-election would be "better for Russia."
A second Bush administration would probably give President Vladimir Putin a freer hand in domestic and CIS affairs, speed up Russia's entry into the World Trade Organization and preserve high oil prices, which would fuel economic growth, Renaissance said.
"We believe that oil prices are likely to stay higher under Bush due to an ongoing anti-terrorist drive presumably directed against some oil-producing members of the 'Axis of Evil,'" the report said.
A Kerry administration would attempt to reduce demand for crude through energy-saving policies and pursue a less aggressive foreign policy that could open up investment opportunities in Iraq for oil major LUKoil.
Under Kerry, however, trade relations could worsen due to the Democrat's harsher line on human rights and democratic norms in Russia, the report said.
Renaissance goes sector by sector -- from metals and shipping firms to fertilizer companies and fixed-line phone providers -- to conclude that a Bush victory would on the whole be better for Russian business.
Entrepreneurs and economists cast a skeptical eye on the report's findings, pointing out that bilateral trade still makes up a negligible part of overall U.S. commerce and that the differences between Bush and Kerry are unlikely to exert much influence on the Russian economy.
"From the economic point of view neither administration will be better or worse for Russia," said Igor Yurgens, vice president of the Russian Union of Industrialists and Entrepreneurs.
However, Yurgens said that there could well be nuances by industry, as the Renaissance report predicted.
"There may be preferences by sector. Republicans traditionally support the oil sector, and in this case there could be some headway on the [proposed] Murmansk pipeline [to deliver oil to North America], building liquefied natural gas plants and acquisitions on the Russian market," Yurgens said.
Likewise, a Bush victory could have medium-term benefits to the defense and oil industries, said Eric Kraus, chief strategist at Sovlink Securities.
"A second Bush administration would likely maintain a foreign policy which would cause considerable turbulence in the Middle East, further pushing up oil prices. Furthermore, for reasons best known to himself, Bush has been steadily adding oil to the U.S. strategic reserves. Kerry, on the other hand, might use these reserves to try to push prices down," Kraus said.
"As regards defense ... those countries not currently in Washington's good graces will be looking to buy more weapons, and Russia will be their first stop."
One reason observers believe there will be minimal fallout from the U.S. election is that annual bilateral trade only accounts for about $11 billion.
"Russia accounts for a measly 0.6 percent in U.S. foreign trade. It is unlikely this volume will be considerably increased or decreased," said Viktor Supyan, deputy director of the USA and Canada Institute.
U.S. exports to Russia last year totaled $2.5 billion and consisted of meat, oil and gas equipment, technical equipment, and cars, according to the U.S. Embassy's commercial department.
Russian exports to the United States were valued at $8.6 billion and included platinum, oil, aluminum, uranium, fish products and ferrous metals.
Nevertheless, Russia is dependent on U.S. approval for membership in the WTO. Any dampening of bilateral relations under a Kerry administration would have an indirect effect on the economy, including a harder line on Russian membership, said Sergei Markov, a former Kremlin political consultant.
"It's hard to say now, but I don't think that a change in administration will have strong implications for the process of Russia's WTO entry," said Vladimir Tkachenko, deputy to Moscow's chief WTO negotiator, Maxim Medvedkov.
But he added that since Kerry has garnered the support of Hollywood's powerful Motion Picture Association, the U.S. position on intellectual property rights may toughen under his administration.
Washington estimates that U.S. companies lost out on more than $1 billion in sales last year as a result of Russian piracy.
Thomas Donohue, president and CEO of the American Chamber of Commerce -- which represents more than 3 million businesses worldwide, including more than 800 in Russia -- said in Moscow last week that Russia deserves WTO status, though counterfeiting remains a stumbling block.
Questions of principle are more likely to take precedent in a Kerry White House, observers said.
"Senator Kerry's vice president candidate, Senator [John] Edwards, is on record as stating that he believes that Russia should not be allowed formal membership of the G8 and should not be easily admitted into the WTO because of the country's record on human rights and Chechnya," said Chris Weafer, chief strategist at Alfa.
Andrei Neschadin, executive director of the Expert Institute, said that a Kerry administration may follow the European Union by not giving Russia special preference and hammer away on issues like the state of democracy and Putin's hard line in Chechnya.
Bush, however, enjoys a personal relationship with Putin, who made a veiled endorsement of the U.S. president last month by saying his defeat in the elections would be a victory for international terrorism.
But the Russian public appears to be backing Kerry by a small margin. In a poll conducted by Levada Center last month, 24 percent of 1,600 respondents said they thought a second Bush term would better suit Russian interests, while 28 percent said so about Kerry.