Wednesday, 30 May 2007

Putin's oil-rich ally knows which side his blini is buttered

The Irish Times

By Jason Corcoran

Letter from Kazakhstan: A billboard-sized photograph of Russian President Vladimir Putin shaking hands with his Kazakh counterpart, President Nursultan Nazarbayev, looms large over the Caspian Sea resort of Kenderli.

Nazarbayev entertained the Russian leader at his summer retreat on May 12th, in between trilateral energy talks involving their countries and the new Turkmenistan leader, President Gurbanguly Berdymukhammedov. Their get-together coincided with a summit taking place in Poland aimed at reducing energy dependence on Russia.

The three leaders agreed
to construct a pipeline to transport Turkmen natural gas to Russia along the Caspian coastline via Kazakhstan, a deal analysts say eclipses EU plans for a trans-Caspian pipeline bypassing Russia.

Nazarbayev was originally expected to attend the summit in Krakow, but pulled out of it at short notice to host Putin, which makes the caption under the giant image at Kendeli rather apt: "Always together, always forward."

Putin's policy of cultivating Russian oil and gas co-operation in central Asia has been most successful in Kazakhstan, where Russian companies are engaged in key oilfield and pipeline projects.

Kazakhstan's trade with Russia tripled over the past five years to $9 billion last year and Nazarbyev clearly knows which side his blini is buttered.

His summer getaway in the Mangistau region of Kazakhstan is surprisingly modest by
authoritarian leaders' standards but every effort was made to accommodate Putin. A guide at the resort let slip that management had illegally hacked into a satellite network so Putin could watch Russia take on Finland in the ice hockey world championships.

Stepping barefoot, as required, inside Nazarbyev's azure blue and yellow-painted
residence, you are struck by its ordinariness.

Granted, the view of the Caspian Sea from the balcony is breathtaking and guests would be impressed by the indoor pool, gymnasium, sauna, steam room and billiards room in the basement; yet the rooms are decorated almost tastefully without any gold-plated bathroom fittings or flattering portraits venerating Nazarbyev.

Black gold has transformed the world's ninth largest country by landmass. Billions of dollars are pouring into the country's coffers from Caspian oil and gas projects and the effect can be seen 210km down the coast at the seaport
Aktau. A legacy of the Soviet era, Aktau was built in the 1960s to produce uranium and plutonium for the military and the city was a secret and closed to outsiders until the demise of the USSR.

Today, the chemical factories are closed and the nuclear power station no longer functions. The port is the centre for development of the offshore oil industry, and a transport hub for ships crisscrossing the Caspian from Azerbaijan,
Iran and Russia, exporting oil and wheat, and importing cars and machinery for the oilfields.

Downtown, cranes intersect the skyline and the old Soviet apartment blocks have been spruced up and daubed with bright blue paint.

Russians make up about 35 per cent of Kazakhstan's population and monuments to Soviet
war dead are more fondly preserved than in other parts of the former USSR. A statue of a Russian jet fighter, frozen in mid-take-off, stands in front of the five-star Renaissance hotel and there is a whitewashed war memorial which resembles a missile silo opening.

Kazakhstan's wealth is controlled by relatives, friends and associates of Nazarbayev, who doesn't have a fantastic track record of managing the
country's natural resources. His son-in-law, Timur Kulibayev, is a senior executive of the Kazmunaigas parent company.

US banker James Giffin was indicted in 2003 for paying bribes to two high Kazakh officials in exchange for the signing of huge contracts for the sale of Kazakh oil and natural gas to Mobil Oil, Amoco, Texaco and Phillips Petroleum.

Nazarbayev has shown no sign of relinquishing the grip he has established in a series of elections criticised as seriously flawed by democracy watchdogs. Last week, he approved constitutional amendments allowing him to stay in office for
life, a move the opposition condemned as an attempt to establish a personality cult.

Yet western oil executives argue Nazarbayev has taken a leaf out of Putin's book by trying to stamp out corruption and improve the welfare and living standards of his people.

Eddie Walshe, an Irish oil veteran who worked for 35 years in oil and gas at BP and British Gas, was last year appointed as one of three independent non-executive directors to the board of Kazmunaigas before its listing on the London
Stock Exchange. "I was here with British Gas in the 1990s when things were fairly lively. They have a far way to go but the transformation today is unbelievable," said Walshe.

Thursday, 24 May 2007

Nomura reopens Moscow office after nine years

Financial News May 22, 2007

Jason Corcoran in Moscow

Nomura, Japan’s largest investment bank, has reopened its Moscow office nine years after pulling out of Russia in the wake of the 1998 financial crisis, when it lost $600m (€445m).

Hiroshi Toda, chief operating officer, said Moscow will be the launchpad for Nomura’s expansion into central and eastern European markets.

The re-entry to Russia comes amid a flurry of interest from international investment banks as capital markets activity in the country hits a record.

Russian companies have raised over $20bn from stock market listings this year, with analysts predicting volumes to exceed $30bn by the end of the year, leading even the most reluctant investment banks to return to Moscow and prompting a fierce war for talent in the country.

Toda said the operation’s main role will be to act as a bridge between Russian corporate borrowers and Asian capital markets. The affiliate will also advise Russian companies and banks preparing to enter the Asian and international markets.

He told Russian online newspaper Kommersant that it was not an opportune time for the country’s companies to list on the Tokyo, Hong Kong and Singapore stock exchanges because their requirements are more rigorous than those of the London Stock Exchange.

However, he said there might be a place for Russian companies when the Asian market becomes saturated with Chinese firms.

Nomura' Moscow office, which opened on March 13, employs five investment bankers. It will focus on underwriting and initial public offering advisory services and will not engage in brokerage activities.

Maxim Seltzer was hired last year from Japanese rival Daiwa Securities as head of Russia and the Commonwealth of Independent States within Nomura’s investment banking division.

Nomura has been winning mandates in Russian real estate. It was an adviser to last year’s flotation by Sistema-Hals, the property arm of Russian electronics conglomerate Sistema, and this month was appointed as joint global co-ordinator of a $1.5bn flotation by PIK Group, one of the country’s largest property developers.

It worked on last year’s pre-flotation convertible bond issue for gold miner Angara Mining.

Japanese rival Mizuho Corporate Bank last year acquired the Russian operations of compatriot regional bank Michinoku Bank, giving it full licence to operate in the country. Mitsubishi UFG is also plotting a push into Russia.

Goldman Sachs and Lehman Brothers have been hiring heavily in Moscow after a long period away.

Vladimir Kuznetsov, director of equity financing at Moscow brokerage Finam, said there are 35 investment banks involved in initial public offerings and mergers and acquisitions in Russia. He said: “Here we are with the new opportunity for Russian companies to attract financing – this time from Asia.”

Two weeks ago, Russia's second largest bank VTB raised $8.2bn from a Moscow and London stock market listing, which is the biggest float completed globally so far this year and the largest from the European banking sector. Article tags:

Wednesday, 2 May 2007

Macquarie in first Russian joint venture

Financial News

Jason Corcoran in Moscow

30 April 2007

Australian banking group Macquarie will become the first foreign bank to invest in Russian infrastructure in a joint venture with local bank Renaissance Capital.

The groups have approached investors about setting up a multi-billion dollar fund to invest in transport, ports and utilities.

Infrastructure was a central theme of Russian President Vladimir Putin’s final state of the nation address last week as he promised funds to improve his country’s crumbling roads, bridges and airports. Analysts put the total cost of these projects at $25bn (€18bn) over several years.

Neil Harvey, deputy chief executive of Renaissance, declined to comment on the venture but confirmed the Russian bank was working with Macquarie to provide finance for a ring road in St Petersburg. The $3bn western high-speed perimeter motorway is the first public-private partnership project to come to market in Russia. It will link highways to Scandinavia with routes to Kiev and Moscow.

Half the cost will be met by the government’s investment fund and the remainder by private investors and the city budget.

Harvey, who worked for Macquarie for five years in Australia, said: “We have enormous respect for Macquarie and we have a very close relationship with them. We are jointly putting together the finance for the road because they are world leaders in this field.”

A source close to Renaissance confirmed a deal had been reached but added: “There is some tension on the logistics. Macquarie is being very combative about some of the arrangements.”

Macquarie became the first bank to launch a dedicated European infrastructure fund in 2004 and its success has attracted rivals to the sector and pushed up valuations for assets that provide pension fund investors with stable long-term returns.

Goldman Sachs and Morgan Stanley have raised funds, while Credit Suisse has a joint fund with General Electric that it expects to invest in emerging and developed markets.