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15 April 2013

Crain’s New York Business (USA), 15.04.2013., Russia is coming, Russia is coming

Country takes steps to be more friendly to finance

By Aaron Elstein

Back in 2007, the government of Russia declared its goal was to make Moscow into an international center of finance. That plan got stalled by the global market crash a year later. Another reason it didn't get out of the gate is that wealthy Russians have yanked at least $120 billion out of the country over the past two years and parked it in places like Switzerland, the U.K. or Cyprus.

Amid that backdrop, it was interesting to see an entourage of Russian finance officials, bankers and corporate leaders descend upon New York last week and try to persuade a crowd of Wall Street pros to invest in their country.

"The Russian government is taking steps to modernize and change regulations after a decade of talking about it," Alexey Yakovitsky, Global CEO of VTB Capital, an investment bank that sponsored the meet-and-greet at the Waldorf Astoria Hotel, assured the audience.

A few hardy souls are defying the exodus and investing in the oil- and mineral-rich nation. U.S. investors bought $49 billion worth of Russian debt last year, more than double the previous year's total, Andrey SolovyevVTB Capital's global head of debt capital markets, said in an interview with Crain's. Russian bonds offer higher yields than many other kinds of emerging-market debt, which of course reflects the risk of putting money in a country where investors fear the government could change the rules of the road at any time.

Still, a stream of officials from Russia's central bank, Finance Ministry and stock exchange did their best to make the case they are becoming more welcoming to outside investors.

One particularly helpful reform that may be coming down the pike is a change in the law that says it's illegal for managers of Russian pension money to post losses in any given year. If they do lose money, the fund managers have to dip into their own pockets to make up the difference, even if that means selling their houses or other personal possessions.

Of course, no pension fund manager in his or her right mind would risk investing in stocks when the stakes are so high, and Russian government officials said they recognize the situation is hindering development of the nation's equity market.

Deputy Finance Minister Alexey Moiseev said fund managers may soon be given five years to recoup losses before they have to pay up.

"Before making things perfect," one attendee told the dignitaries, "could you make them better?"

Corporate Communications VTB Capital