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Knights of the Vine RUSSIA


Yukos Dominated British Business RBCC Debate

John Bonar

The combined efforts of former UK Energy Minister Tim Eggar and former BBC Hard Talk presenter Tim Sebastian instilled discipline on a sometime spirited Russia Talk debate, the flagship event of the Russian British Chamber of Commerce in October in Moscow.

The debate, attended by some 250 representatives of British and Russian business in Moscow, and with video links to the RBCC offices in London and St Petersburg, opened with a state-of-play briefing by Britain’s Ambassador, Anthony Brenton, who stated that the Russian economy “is doing exceedingly well” and stressed that this was not simply oilbased, but marked by “new dynamic economic activity” in all sectors. 2004, the ambassador said, was a “record year” for the UK’s economic relations with Russia. UK-Russia links are getting stronger and few out of the top 25 UK export markets “have seen such levels of growth.”

However things “could be better” he noted.

Property rights and the rule of law were areas he singled out as requiring further attention, and he noted that the Yukos affair had caused a “severe dip” in investor confidence. It was a theme returned to again and again throughout the day by many speakers and participants in the debates.

In conclusion, the Ambassador said he anticipates a “steady stream of upward growth” in the economy, but cautioned that it will be a “roller coaster ride” with some set backs along the way.

Giorgy Petrov, Vice President of the RFCCI, reassured participants that while there was continuing speculation about Russia’s political stability, the outcome of the 2008 elections and what President Putin would do, “One thing I am absolutely sure of, whatever the outcome, the market economy is here to stay.”

He said that while Russia was still not a fully developed market economy, it was absolutely clear there was no going back to a centralised state economy.

It was left to Peter Necarsulmer, Chairman and CEO of the PBN consulting company, to introduce what became the buzz word for the day, Russia’s legal ‘Twilight Zone’ — for these situations when the enforcement of the law is at variance with its spirit. He paid tribute to President Putin’s “absolutely record approval ratings of over 73%” and noted this was virtually unheard of for a leader after six years in office. He also said that the Russian Federal Government does not put attracting Foreign Direct Investment as a priority. “And why should they?” he asked, when “achieving long term political stability, fighting terrorism, and achieving long term economic security,” were so much more pressing. He suggested regional governments were more focused on attracting FDI.

He said that if major international corporations wished to continue to do well, they need to align their strategic business interests with the policies of the Russian government.

Paul Melling, Managing Partner of law firm Baker & McKenzie, singled out tax reform as the most successful reform undertaken by the government bringing “so much of the black economy into the white economy.” Noting that the court system has significantly improved to the extent that business could “litigate and win” he cautioned that there remained a gap between “what the law says and how the law is applied.” He said that you did not have to be a Khodorkovsky to find yourself in the ‘Twlight Zone’, recalling a recent case of a British businessman who found himself there over a dispute on raised flooring.

However, he hastened to stress that “the vast majority of people never enter that zone at all!”

Henrik Winther, COO and Senior VP of Rosinter Restaurants, recounted the restaurant group’s strategy of expansion into the regions. “We currently are in 20 cities in Russia. Within five years we want to be in 50,” he said. Compared to operating restaurants in the West, he said “In some ways Russia is more difficult, but in others it is more forgiving.”

There were many references throughout the day to Khodorkovsky, Yukos and the Russian economy’s dependence on oil.

The RBCC recently welcomed Neil Cooper as new Moscow office Director. A fluent Russian speaker with 25 years track record of business development and management in Russia, he is expected to drive RBCC activities to new heights of excellence.

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