Thousands of riot police beat peaceful anti-government protesters during opposition marches in Moscow and St. Petersburg in mid-April, signaling the Kremlin’s intention to obliterate what are only the smallest glimmerings of anti-Putin sentiment. The show of excessive force predictably resulted in an international outcry but will have little impact on the Russian economy or investment environment. However, any escalation of the government’s aggressive response may boost uncertainty in the runup to the electoral season in late 2007/early 2008.
BP’s Russian joint venture, TNK-BP, participated in an auction for a 9% stake in state oil company Rosneft. The stake was owned by former oil giant Yukos. But TNK-BP’s participation in the sale, which was the first step in the final dismantling of the bankrupted company, was apparently little more than window dressing so that the auctionwhich required two bidderscould be won by Rosneft itself, which wound up paying about a 10% discount to the market price for the stake.
A meeting of major natural gas producers and exporters raised hackles, particularly in gas import-dependent Europe, about the formation of an OPEC-style cartel. But Russia, which is the world’s largest gas exporter, indicated that a more formal organization and price control efforts were not in the cardsat least in the short term.
Russian national air carrier Aeroflot joined the fray to bid for troubled Italian airliner Alitalia. While still facing its own challenges, Aeroflot, which has the backing of Italian banking giant UniCredit for a bid, would probably face regulatory hurdles before it would be able to try to tackle Alitalia’s myriad operational challenges.
Ukraine lurched back toward revolution, triggered by President Viktor Yuschenko’s decision to dissolve parliament, as a delicate alliance with Prime Minister (and defeated presidential candidate) Viktor Yanukovych unraveled. While both sides showed signs of softening, the renewed political volatility bodes ill for the investment environment, which was still recovering from the uncertainty generated by the Orange Revolution two years ago.