Time to Invest in Russia

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As Vladimir Putin returns to the presidency
of Russia he “orders” increased investment
by the government and pressure on
government run industries to modernize
and become more efficient.

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If you are thinking that this is the time to
invest in Russia please remember that Mr.
Putin’s decree for a so called new
economy sounds a lot like the
pronouncements the commissars under
the old communist regime.


Then the question is, what is a good
investment in Russia today?


Because of the return of Mr. Putin and
because the world economy is ever so
slowly improving after the worst
recession in three quarters of a century
let’s say that it is time to invest in Russia.


What does Mr. Putin’s call for a new
economy mean?


Revamping old state run industries may
make things run more efficiently but this
has little to do with private investors.

Russia is the second biggest producer of
oil in the world at just over 10 million
barrels a day as of 2010.


The nation’s economy consumes
2.2 million barrels a day and
exports 5 million barrels a day.

Its proven reserves are around 69
billion barrels.

It is the world’s second greatest
natural gas producer as well at 588
billion cubic meters a year.


It uses 414 billion cubic meters of gas a
year and exports 200 billion cubic meters
making it the world’s leading natural gas
exporter.


Its reserves are estimated at 45 trillion
cubic meters as of 2011 giving it first
place in the world.


But, if it is time to invest in Russia is it
time to invest in oil companies in
Russia? Mr. Putin, in fact, is trying to
decrease the dependence of Russia on
oil and gas exports.


On a profitable investment timeline it may
be time to get out of Russian oil stocks
and not in as European threatens to fall
into recession again and drive oil prices
down.


The goal is to improve the business
climate in order to attract more
investment. This includes decreasing the
still heavy hand of the state.


Mr. Putin’s orders are to produce 25 million
high paying jobs by 2020. Sounds like
more of the commissars Mr. P.


However, the goal of producing more high
tech products is not just a pipe dream.
Russia has skilled scientists and
technicians.


They, after all, are the link to the
International Space Station now that the
fleet of Space Shuttles have been
retired.


The complete range of Russian industry according to the CIA Factbook looks like this:

• Mining and extractive industries producing coal, oil, gas, chemicals, and
metals

• All forms of machine building from rolling mills to high-performance aircraft
and space vehicles

• Defense industries including radar, missile production, and advanced
electronic components, shipbuilding

• Road and rail transportation equipment

• Communications equipment

• Agricultural machinery, tractors, and construction equipment

• Electric power generating and transmitting equipment

• Medical and scientific instruments

• Consumer durables, textiles, foodstuffs, handicrafts

The World Bank has a Doing Business
Index in which Russia currently ranks
#120 in the world (#1 is best).


Mr. Putin wants the country up to at least
#20 by 2018.

If you think that this wish makes it time to
invest in Russia please remember that
Russia produces as many bureaucrats as
the Ukraine produces potatoes.


Unlike potatoes bureaucrats are not
consumed.

They multiply.

While good fundamental analysis is
essential to profitable investing it can be
difficult to factor in the costs in Russia of a
bloated and recalcitrant bureaucracy.


A place for possible investment in Russia
will be the group of companies that may
be privatized in the coming years.

These will not be in defense or natural
resources.


For more insights and useful information
regarding investments and investing, visit

Time to Invest in Russia

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