Last Saturday was a “historic” moment in Russia. At the political convention of United Russia, President Dmitry Medvedev announced that Vladimir Putin would stand for election as Russia’s next President when elections occur next March. Putin then took the podium and announced that Medvedev would be asked to form the next Cabinet after this December’s elections for the State Duma, Russia’s national legislature, as Prime Minister, Putin’s present job. (He would have to resign as President to assume such role or Putin could hold over until March)… I was still in Moscow from a week of meetings with leading oil & gas companies, including a visit to Lukoil’s largest refinery in Nizhny Novgorod, and the reaction to these announcements was “as expected”. Certainly this tandem in leadership has been very effective for Russia’s economic growth and these announcements remove uncertainty as to future economic policy since it is widely assumed that Putin will win.
The one clearly negative development was that Alexey Kudrin, who resigned, will not be on that winning team. He has done a superb job as Russia’s Finance Minister during the past decade… Russia’s economy is growing this year at 4%, down from a few years ago. The stock market has been down about 13% over the past year as panicked investors flee equities in general worldwide and emerging markets in particular. As bad as that is, markets are down more in India, China and Brazil, the other BRIC countries….Oil & gas have done well, but steel and consumer sectors have been hit….The stock picking strategies of portfolio managers based upon company and country macro fundamentals have been overwhelmed by global macroeconomic concerns.