31 March 2006

Kommersant: Raw Mentality

I came across this story courtesy of Valleywag, a Valley (Silicon-type) online scandal site with an unhealthy interest in the love lives of the Google Two and the females who work there (though guys, you MISSED the Moscow office).

Back to the boring.  Valleywag picked up on  Sergey Guriev's claim in Kommersant that the most famous Russian in the US last year was Sergey Brin, not Khodorkhovsky, our very own VVP or any of the Fifth Directorate Thugs currently taking courses in basic economics courtesy of the Russian people.

I am inclined to agree with the basic premises of the article; namely that the West sees Russia very differently from the way that Russia sees itself.  But as a favor to you, my honored reader, I have edited out some of the more ridiculous statements to focus on the core of the argument;



“There are two separate Russias in the modern world. One is the Russia of the Russian media. It is an energy superpower rapidly returning to its former position in the world. The second Russia is the one in the Western consciousness. That is a corrupt, authoritarian country with a small economy, an unfit army and imperial ambitions. In that regard, Russia has come to look more like the Soviet Union in recent years. It is not just a matter of spy scandals and the nationalization of the petroleum and automobile industries. The perception of Russia, by both Russians and foreigners, has changed as well. As in Soviet times, those perceptions are again diametrically opposed.”

Guriev goes on to claim (and I am not sure that the argument hangs together) that Russia cannot survive on natural resources alone.  It is however, an argument that VVP certainly buys.



“Dutch disease of the mind is dangerous because Russia cannot have a long-term raw materials-based future. Oil, gas and metals cannot ensure sufficient income for a country as large as Russia, even at current prices. If oil prices fall in three or five years, due to a world recession, or stability in the Middle East or the introduction of energy conservation technology, the authorities in Russia will not be able to keep their promises to the voters and a political crisis will be unavoidable. And the change of governments will not necessarily take place constitutionally.”

The penultimate paragraph is very very good.  It reminds me of the Britain I grew up in and watched being changed in front of my eyes by Mrs Thatcher.



“Dutch disease of the mind is dangerous because Russia cannot have a long-term raw materials-based future. Oil, gas and metals cannot ensure sufficient income for a country as large as Russia, even at current prices. If oil prices fall in three or five years, due to a world recession, or stability in the Middle East or the introduction of energy conservation technology, the authorities in Russia will not be able to keep their promises to the voters and a political crisis will be unavoidable. And the change of governments will not necessarily take place constitutionally.”

See he just blew it in the last sentence.

My take is that Russia's educated youth is a lot more content than Guriev gives them credit for.  Though I question whether they should be and whether they have learnt too many bad lessons from their leaders.  In particular that it is stupid to work for money when it can be taken for nothing.

And the best thing about this post; technology and commodities all in one post.


[composed and posted with
ecto]


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More on Gerhard Shroeder in Russia

The Russia Journal performed a fantastic service by transcribing this piece from Ria Novosti in its blog.

Other than being written by someone in the Government for RIAN it alerted me to a little known due diligence procedure - talking to Reindeer herdsmen before accepting a job offer;



As always, Schroeder was accorded a hearty welcome in Russia. Before the NEGP Russian-German consortium stockholders meeting, he had visited the cold and remote gas-producing regions. Gerhard Schroeder met with locals, sat with Yamal reindeer-breeders in a chum (portable framework dwelling), and saw industrial facilities in action. This is in his nature - Schroeder always thoroughly studies the situation before making a final decision.

Some of the political analysis is a little baffling



Schroeder’s failure to get re-elected has not caused such dramatic consequences. Half of the current government leaders are his party colleagues, whose duty is to strictly monitor the implementation of the coalition agreement, which has sealed the main directions of his policy. Besides, the situation in Europe does not permit individual countries to “go wild”.

But I was in need of a smile to end the week.


[composed and posted with
ecto]


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Schroeder Named Chairman of Gas Pipeline

I had been searching for something a little scurrilous to post on today (note to self: evidently feeling better.) This mornings trawl through my feed reader brought nothing. A mid-afternoon decision to see what the Moscow Times was adding to the sum of human understanding unearthed the VVP/Schroder/Warnig pipeline love triangle. I would have been delighted to attribute it to the MT, however anything more than 24 hours old requires subscription so the Washington Post got the honour instead.

It's all so fantastically incestuous. Firstly Gerhard "brown paper bag" Schroeder gets inconveniently voted out of office. Instead of going on the speaking circuit (topic - how not to reform the German economy in 2 electoral cycles) he takes the brown bag offered by VVP who has a western lemming to point to when all does not go well. For those of you with a logical disposition (i.e. you aren't reading this post from the same country which it is being posted) it might seem logical that a prominent German should head a company which has significant German investment and the Russian state/GAZP as the majority shareholder. Unfortunately, Schroeder was invited to take the post by GAZP, or so he claims, to avoid the unpleasant assumption that he jumped from a badly-paid German government job to a (reasonably) well-paid German private one. It's just so much better if its a Russian one.

Add VVP's favorite investment banker as managing director and the menage-a-trois (its just not as sexy in German, or English for that matter) is complete.

I would like to point out that I have no issue with the pipeline, Germany's investment in it or GAZP's role. The economic/political rationale is sound. I just dislike the incestuous kleptocracy that inhabits the top of every country and when they don't even have the brains to hide it I worry for our countries.


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An Enemy of the People

I posted on the problems that Bill Browder was having getting back in to the country with my tongue stuck firmly in my cheek. Looks like its worse than that as reported here by the Economist and here by the Observer.

Whilst he is hardly the wealth-maker for Russia that he is portrayed to be; all his money is made for clients and, rightly so, himself. He has been banned as a potential threat to national security; frankly bizarre. He is a little abrasive and, as with many money-managers, a little egotistical. A threat to national security - no.

The Economist assumes that Bill's anti-corruption campaigning is the reason that he has been banned. That is, his desire to increase share prices of his favorite holdings through forcing non-market contracts to be turned in to market ones. I struggle to believe that the 5th Directorate Thugs are that stupid; history/evidence would suggest that I am wrong.

Sometime ago in struggling to understand the logic behind another bizarre decision I was helped by Vladimir Vladimirovich. He suggested that if Russia had to do something bizarre every now and then to keep us all on out toes.

As an associated thought its actions like this that give Illarionov's rants re cleptocracy some credibility, contrary to Konstantin's thoughts.

The Exile would not be my first choice for an objective economic analysis. The commenter is a little brutal but his point is well made. Avoid economic analysis when its clear that even Illarionov's grasp of economics is greater than yours. The first quoted paragraph shows such a weak grasp of commodity-driven economies that pre-University students would be failed an economics paper for it.


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25 March 2006

A New Russia-related Business Blog

As it is called the Russian IT blog you get the areas that it covers; Russian IT Industry:

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24 March 2006

Yukos Case Highlights Role of Foreign Banks

Rosneft: Caveat Emptor (3)

From the FT Yukos case highlights role of foreign banks.

Not only would a buyer of Rosneft (quasi non-)equity not be buying a "share" of the Company but would be buying it from western companies who "are actually building long-term relations with those forces in Russia that are destroying the very pillars of modern society: a market economy, respect for private property, democracy."


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Rosneft IPO - Caveat Emptor Update

Following my brief Caveat Emptor warning on Rosneft IPO this from the Prime-Tass website.

As the author notes;

After all, the outright exuberance among financial analysts and Russian and Western investors over Rosneft's IPO plans seems somewhat irrational. Sure, the IPO would open the state company to private investment, but lost in the enthusiasm for exposure to Rosneft is some common sense - after all, this is the same company that last year managed to make even Gazprom look like a transparent, efficient company. Rosneft's recent efforts to clean up its image - including a failed attempt to lure former U.S. Secretary of Commerce Donald Evans to become the company's chairman - should not obscure Rosneft's less-than-stellar past method of operating.

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23 March 2006

Court grants seizure of 1m euros

Filed under; many things you don't know about me;

Court grants seizure of 1m euros.

Could not happen to a nicer guy. I hope he spends years picking up soap in men only shower facilities.

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22 March 2006

VIP.N Alfa & Telenor

I'm a finance guy, albeit an early stage one, and I'm worried by the shareholder approach that says that Telenor should be a seller of Kyivstar and VIP.N so that it can return cash to shareholders. I tried two IB websites for some clarity - they are both on the outside now but are hoping that Spitzer-lite comments will get them a place at the table - so no clarity.

I can see that Vodafone should be divesting in negative-growth Japan and creating a solution in the US. These are both low growth markets. Ukraine, in particular, and Russia are not low growth. They are both simplistic telecom markets with no service culture. If investors in Telenor can generate higher returns than VIP.N and Kyivstar then don't invest in Telenor unless your Alpha-search is in excess of 4. It's what is known in game theory as a double-edged sword.

What I can see an innovative corporate financier (OK it's an oxymoron) doing is underwriting Telenor's buyout bid for Alfa's stake and then buying it out at an attractive premium. A switch from zero growth Japan to 20% growth Russia would be a redeeming move for Vodafone's management.

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BBC vows to reinvent web services

Not a headline that you would readily associate with the venerable Beeb.

BBC vows to reinvent web services.

I spent an entertaining half hour yesterday trying to explain why the BBC was not a good example to cite as a global media agency - in short it's shareholder measurement of return is based on EPS. What they have done though is get way out in front of the market in terms of using technology to enhance its content.

Long live advert fee license fees that someone else pays for.

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Russia China and Gas

To satisfy my ego, no more Sun-type headlines; my most visited posts have titles like IBM Targets Russian Developers. Seems the search engines prefer these to Investment Banking Whores Find New Boyfriends.

So the sub-text headline is: Russia and China Spout Hot Gas

There are enough links across the web to........., no good analogy comes to mind, but you get my point. My early morning reading chucked up two from the FT; Russia pledges gas pipelines to China and a subscription only piece from an Executive Director (no less) at the International Energy Agency - Claude Mandil. The long and short of which say that Russia has pledged two pipelines originating in western Siberia that will terminate in China. I even believed that they would allow gas to go down them. I am sure that the Japanese are thrilled by this - but then they got Sakhalin's LNG and are less willing to make soft loans to purchase Yuganskneftegas.


Mandil's op ed piece says that the Chinese contracts will impact western Europe's energy security because Russia/GAZP (whoever) needs to invest $11bn annually after theft (actually he didn't say that) to supply enough gas to honor both its European and Chinese contracts/commitments. What worries me about the headline is Mandil's Euro-centric view that Europeans have a right to the gas - he is French after all; Russia must act to avert gas supply crisis. A GAZP spokesman refutes his statement but you need to have an attention span longer than 5 minutes to get there. Mandil's point about the need for investment (and competence) is correct if European's aren't to spend significantly more on their gas from Algeria; albeit that will also be supplied by GAZP.


The last two links are from the Russia Journal, which used to be a newspaper and is now a supplier of good headlines for a slightly more Russophile point of view. Russia to remain the world’s energy donor and relevantly China gas supplies to end Russia’s European dependence.


Russia and Russians are proud of VVP's energy policy which I would summarize as; if you want to be warm, its time to treat us like grown-ups.


The problem with his energy policy is the problem of many if not most Russian businesses; the theory is fine but the execution is flawed. GAZP and Rosneft are not companies, they are ministries with a license to enrich their managers and stakeholders. Grabbing assets from bankruptcy is a fantastic one-time wealth creation scheme, creating a world class company requires more than having long dinners with tall girls.


Of the many things you don't know about me is that 18 years ago I studied nuclear deterrence and Russian politics (along with colouring in the Dandy and Beano). Carrying a big stick and talking softly is a fine policy as long as you are willing to use the stick; and demonstrate that willingness from time-to-time. A policy that requires Russia to be the "world's energy donor" also requires it to be the world's energy industry leader. With all due respect to the native cunning of the 5th Directorate Thugs it's not their natural environment.


Russia has every right to dispense its natural resources as it sees fit and base its foreign policy around their distribution. It runs the risk of wearing the Emperor's new clothes if it does not invest in E&P assets and the infrastructure to get the gas to markets.


Enough gassing.



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21 March 2006

Corus held merger talks with Russia's Evraz

What role Abramovich? Jose Mourinho for CEO? Corus held merger talks with Russia's Evraz:

Corus, the Anglo-Dutch steel company, has held talks with Evraz, Russia's largest steel producer, over a possible merger in a deal that would create one of the world's top six largest six steelmakers by volume, according to a person close to the negotiations.

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Global Outsourcing : Offshore Locations : Russia's High Value Call

A good piece on Russia's place in the global outsourcing world. The author is definitely more optimistic than I am. Global Outsourcing : Offshore Locations : Russia's High Value Call.

The stat that I like is the average monthly wage between Russian and Indian engineers - $8-14k/year vs $7-11k/year respectively. You might just get an American mathematician for $1k/month in Moscow but anyone who does not need help in turning on a computer is $1.5k+ (paid white). And wage inflation is definitely 10-15% p.a. Clearly Novosibirsk, Tomsk and the other Siberian cities are cheaper. But that's a hell of a long way to go to get an engineer. So very soon Russia will be significantly more expensive than an Indian (and the Chinese??) and will be trying to sell more quality at a higher price - if they can.

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20 March 2006

Moscow Refinery Wins Court Case

Actually it did not. It won a case in Russia which in effect says that if a Russian registered company willingly enters in to an agreement (otherwise known as a contract) whereby disputes are settled via arbitration, in this case in Stockholm, that has no impact in Russia. OilVoice.com | Moscow Refinery Wins Court Case.

Thus the cost of doing international business in Russia has just increased as it means that foreign arbitration has not weight under Russian law. It's not as though its a shock - this has been going on for a while. If Russian judges were better trained then the issue would be less important - but they aren't.

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Rosneft float ‘by October’

Caveat emptor. Buyers of shares will be providing cash in return for what precisely?

Clearly not any say in the Company, which includes when, where and how much of a dividend stream is provided as recompense for buying an option to capital appreciation. I am looking forward to the first squeal when Rosneft decides that its stakeholders are more important than the shareholders.

Rosneft float ‘by October’:
UNCERTAINTY over Russia’s biggest initial public offering (IPO) was swept aside after the government said last week state-owned oil company Rosneft would float “before the end of October”.

Putin rejects Barroso plan for ‘reciprocal gas access’

Putin rejects Barroso plan for ‘reciprocal gas access’ and quite rightly so. The customers aren't going anywhere, the pipelines aren't either - until LNG and/or GTL comes on line in the next 5+ years. In the meantime GAZP can acquire customers with its cash. Why would Russia agree to a social contract with Europe when Europe's not willing to create alternatives.

EUROPEAN Commission President Jose Manuel Barroso on Saturday confirmed that Russian President Vladimir Putin had refused his plea for European companies to gain access to Russia’s gas pipelines and reserves in exchange for access to Europe’s gas consumers and networks by Russian gas giant Gazprom.

19 March 2006

Hedge Fund Chief Can't Get to Russia

Seems like Bill is stuck in London until he agrees to what - stop telling the truth about GAZP? Hedge Fund Chief Can't Get to Russia:

Russia has been holding up an entry visa to William F. Browder, who controls a $4 billion hedge fund in Moscow.

18 March 2006

A Moscow Traffic Rant

Warning this post contains language that might be considered unsuitable for children and Moscow drivers (the mental age overlap is close to 100%) and the GAI (who don't have a mental age - unless using a electron microscope) and young Russian females whose ability to give blow jobs and talk on mobile phones is significantly in advance of their ability to drive (no coincidence says the man who gave them the car and the other man who gave them the license). Oh and the wanker who thinks that building more roads is a better plan than installing a traffic management system.


Over the last two days I have spent fucking hours and hours in traffic jams. Jams that could have been partially avoided by the use of a. a brain and b. an understanding of how wide your car is (particularly aimed at the Range Rover and Zhiguli driver who crashed head-on on Gagarinsky, a single lane road (actually its not a single lane road but as no one can parallel park it's become a single lane road) c. the ability to move in traffic d. a moronic desire to sit in traffic jams.


I mean for fucks sake we all have places to get to. A small (I mean tiny) application of the brain will get you there 3 times faster than sitting behind a trolley bus doing 30km/hour.


This is not a rant about a lack of society resulting in no road manners - its about a desire to get from a-to-b in the shortest possible time with the least hassle. Its a selfish desire that involves cooperating with others to get it done.


When I become President I will first, shoot on site all Volga drivers (no exceptions) followed by a selective culling of young, female drivers in expensive foreign cars who believe that it is possible to talk on mobile phones and drive in the pereulki around my apartment (you can guess the criteria) and finally all GAI - I think starvation would be a particularly appropriate way to go for the fattest community on earth (except the US.)


Rant over



Update - if you don't believe me enjoy this from Google Video


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16 March 2006

Doubts raised over Wimax's future

You don't say: Doubts raised over Wimax's future:




The much hyped Wimax technology may struggle to succeed says a report by the economic group, the OECD.


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A Moscow Traffic Rant

Warning this post contains language that might be considered unsuitable for children and Moscow drivers (the mental age overlap is close to 100%) and the GAI (who don't have a mental age - unless using a electron microscope) and young Russian females whose ability to give blow jobs and talk on mobile phones is significantly in advance of their ability to drive (no coincidence says the man who gave them the car and the other man who gave them the license). Oh and the wanker who thinks that building more roads is a better plan than installing a traffic management system.

Over the last two days I have spent fucking hours and hours in traffic jams. Jams that could have been partially avoided by the use of a. a brain and b. an understanding of how wide your car is (particularly aimed at the Range Rover and Zhiguli driver who crashed head-on on Gagarinsky, a single lane road (actually its not a single lane road but as no one can parallel park it's become a single lane road) c. the ability to move in traffic d. a moronic desire to sit in traffic jams.

I mean for fucks sake we all have places to get to. A small (I mean tiny) application of the brain will get you there 3 times faster than sitting behind a trolley bus doing 30km/hour.

This is not a rant about a lack of society resulting in no road manners - its about a desire to get from a-to-b in the shortest possible time with the least hassle. Its a selfish desire that involves cooperating with others to get it done.

When I become President I will first, shoot on site all Volga drivers (no exceptions) followed by a selective culling of young, female drivers in expensive foreign cars who believe that it is possible to talk on mobile phones and drive in the pereulki around my apartment (you can guess the criteria) and finally all GAI - I think starvation would be a particularly appropriate way to go for the fattest community on earth (except the US.)

Rant over


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15 March 2006

Investment Banking Whore's Find New Boyfriends

First Merril Lynch's Alan Vine joins Nafta Moskva board as Chairman. I expect that he will have the same success as all the other investment bankers reinvented as private equity guys - who cares the salary is fantastic. A couple moles in ML say that it may the most celebrated resignation this year/decade. Another IB to Private Equity jump is about to occur in the incestuous world of Russian private equity - but the news is embargoed to the end of the month.

Then Rosneft set to hire O'Brien to head IPO.

Investment bankers joining the PE bandwagon - a strong contra-indicator to continued strong growth?

Rosneft is preparing to recruit an American investment banker, Peter O'Brien of Morgan Stanley, as a senior executive to head the state-owned Russian oil giant's preparations for what could be the world's biggest initial public offering.

Russian PM presses for compliance with inflation schedule

I love the King Kanutian (sic) approach to one of the intractable issues in growing economies. Russian PM presses for compliance with inflation schedule:

You can sort of picture the scene (with apologies to Vladimir Vladimirovich):

Putin to Fradkov
Putin: Get inflation down to 8.5%
Fradkov; Yes master

Fradkov to Gref
Fradkov: Get inflation down to 8.5%
Gref: It's not quite that simple
Fradkov: What's so difficult about putting 8.5% next to the inflation figure
Gref: Well it's just that the very clever Mr. Breach might notice......

MOSCOW - Russia’s prime minister Wednesday called for the planned inflation rate of 8.5% to be kept to in 2006 amid concerns over the country’s economic performance at the beginning of the year. “We must adhere to the slated rates of consumer prices this year,” Mikhail Fradkov said at a Cabinet session.

14 March 2006

Everybody is in Everybody’s Business

Om is worried that Everybody is in Everybody’s Business. As he points out, it wasn't that long ago that "core competence" used to be the watchword(s) (sic). It's unlike Om to have missed the latest buzzword "edge." For once we aren't referring to networks but economics. There is no good consulting-speak definition of what people mean. Lacking the ability to come up with a phrase that sounds snappy, but ultimately meaningless, I have tried to explain it as the ability to make money out of businesses that are horizontal to your business. In discussions with a (very) solid and cool Magazine1.0 company which is trying to decide if there is a return in Web2.0 functionality in an emerging Internet economy. The straight ad $ returns are unspectacular - hence drive greater revenue through monetizing the eyeballs in other businesses. I guess that's where Google et al got to as well. Having conquered their part of the business the risk was that growth would turn very unspectacular - hence a trip in to - well where precisely?

One of the only endearing aspect of the 2001-to-2005 technology downturn was that people focused on their core business, and tried to build profitable franchises and stayed away from projects that were sure shot money losers. Well, no longer. Now everyone is in everyone’s business.
Google is going to sell books, taking on Amazon. Amazon in turn wants to take on Apple and do movie and music downloads. (Never mind no one is making money in that music download business except Apple.) Microsoft wants a piece of the Search action, and is going all guns blazing after Google, which in turn is going to try and do online word processing. Oh it will also do payments, taking on eBay’s Paypal.
Just thinking out loud - whatever happened to the core competency? Is the pressure of meeting the quarterly numbers and pleasing the Wall Street so much that companies are once again taking their eye off the ball. Jeff Bezos should be making sure that his online super-mart stays profitable instead of blowing up big dollars on a download service which may or may not become a big business.
Apple, for all its faults has that focus thing down pat. Okay maybe I am just being old-fashioned… hmmmmph!

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11 March 2006

Rostelecom to takeover VoIP provider Zebra Telecom

Rostelecom to takeover VoIP provider Zebra Telecom:

As the author points out below VOIP providers that terminate on the PSTN are being forced to do deals with incumbents just in case the valuation of Svyazinvest's privatization is depressed. Sad to see that innovation ends up in Rostelecom's hands.

Rostelecom reportedly acquired Zebra Telecom, which provides IP telephony and Internet access services, in a move to get closer to end customers and buy back lost market share.

Russia’s new telecom law that went into place officially on Jan 1 prohibits offering a VoIP service without meeting some requirements. Under the terms of the new law any VoIP originating or terminating onto the Russian PSTN, or that terminates internationally, must switched through one of the nation’s long-distance operators. Rostelecom is one of the incumbents that holds the license to provide long-distance service. Zebra Telecom and likes faced several options:

to make a deal with one of the incumbents;
to be acquired by incumbents; and
to become one of the incumbents by investing into the infrastructure to meet the government requirements to qualify as an incumbent.

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10 March 2006

March, 8 and [Equality], Domestic Violence

With many thanks to Konstantin for opening up the discussion on the overtly saccharine view of International Women's Day with his post March, 8 and Equality, (in its entirety at the bottom of the post.) I thought I had made it past the need to post on the most ridiculous holiday; but the itch would not pass. Whether American women (or Americans full stop) study enough science is beyond the point. March 8th is a game. It starts on February 23rd (or the day you get your first hormonal itches whichever comes sooner) and culminates in a 5-year-old-waiting-for-santa-to-arrive-fest on March 8th. It involves the same moral corruption and implicit bribery that Christmas does, but between adults. And it finishes in a haze of domestic violence fueled by grain and potato (I have the stats) and an unusual familiarity with the kitchen.

But beyond the obvious questionable notions of March 8th there are for foreigners some questions of etiquette that need to be answered. We've been here long enough to have escalated through chocolates and flowers to mobile phones and, according to BBC Radio4 Today Program, sex toys. We've learnt enough to know that the GAI also have to buy presents the week before so be on best behavior when driving. But how do you apportion your time between your wife and mistress?

The guess was that the evening of the 7th was for the mistress/girlfriend and the day of the 8th for the wife and family. Answers on a postcard......

I know that most of American and European women view the way Russians celebrate the 8th of March as machismo and anti-feminism. Why on earth human species with ovaries get gifts from human species without them? Before sneering at Russian women (and men) being so retrograde and so far behind from modern gender equality I would note that Russian women came to this “inequality” voluntarily and the hard way.

In the 1930’s the Soviet Union was far “ahead” in gender equality than any other country on earth. Being a housewife was almost a felony. Three months before birth of a child, three months after – and back to work. Salaries were strictly equal for men and women. Women were CEO’s, pilots, drivers, construction workers and heavy machinery operators. The 8th of March actually was a Soviet holiday to promote feminism and to glorify working women. Such capitalistic things as makeup, perfume or fashionable clothes – intended to keep women in imperialistic kitchen slavery – were frowned upon.

One of the things that surprised me greatly at American universities was that so few women (almost all of them foreigners) study engineering, accounting or medicine. I thought that American women, being so feministic, would love to study engineering. At school we were always told by our teachers that girls are better at mathematics and chemistry than boys.

Understanding that traditional gender roles were not capitalistic or imperialistic started in the USSR in the 1960’s and soon the 8th of March became, first, a kind of Mothers’ day and then as a holiday for every woman. Soviet women didn’t like the idea of being just human species with ovaries.

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07 March 2006

More From the Department of Strange Goings on In Russia Telecoms

As both these low-quality articles point out there is something a little fishy going on in the world of Russian Russian WiMax.

To save you your click through energy. A group that no one has ever heard of before suddenly obtained WiMax licenses for all of Russia. According to the second article (cunningly disguised as a link in WiMax) first had the money to invest and then maybe did not.

A non-serious question first:

What is it about telecoms that attracts fraudsters and the gullible?
What is WiMax?
And why are you interested?

More importantly and seriously:

Licensing - It's actually not that difficult to get your hands on licenses, and pan-Russia licenses are no more or less difficult than Region-specific ones. It's the terms that are killers. Pan-Russia licenses have deployment terms that are generally pretty impossible to match unless you have the cash lined up subject to licensing. Which, to-date in Russia, only happens if you happen to be creating the third mobile license from nowhere and Leonid Dodonovich is MinSvyaz. i.e. it's clear which is the chicken and which is the egg. Failure to meet license conditions in any one region negates the others. In short Russia's licensing regime is liberal provided you execute and draconian if you don't - or I don't like your tie.

Why use WiMax: Some would disagree with me, not least of all the very smart Elena at Baring Vostok who invested in Enforta earlier this year, but I am not a believer in WiMax as a solution for Russia's urban environments and here's why:

They are very densely populated (Tokyo-dense) which calls for scalable bandwidth (please don't quote theoretical throughputs)
Internet is the prime-driver but ARPU's are headed for $14 and double-play (Internet, visual data) will be needed
There is a much higher ratio (i.e. closer to 1:1) of outgoing/incoming traffic from early adopters (gamers) who much prefer being able to play Intranet than Internet
The past is not a predicator of the future.
I am not in favor of the investment theory that says we will acquire the customer with a cheap solution and upgrade the network as required - there is too much competition.

So I will join the ranks of the sceptical and back my hunch that bandwidth is the winner.

Reiman vs Alfa (and KPMG and Bermuda Ministry of Finance) - Update

As part of my public service in keeping you up to date with the goings on of Leonid (MinSvyaz) Dodonovich and Jeffrey "it was a mistake" Galmond here are a couple of links.

The first comes from one of My favourite publications Trusts & Trustees - all about Trusts, which I have been perusing to keep you up to date in telco scandal watch. It would appear that the Bermudan Ministry of Finance does not have enough faith in its regulator and has taken over the investigation in to IPOC. T&T alleges that Russian telecoms scandal edges closer to Putin though to be honest if the investigation has got this far VVP must be well insulated. Here's more from the Bermuda Minister of Finance.

In order to understand the pyramid scheme of outright lies and obfuscation, Bermuda retained KPMG forensic investigation team (the ones who have learnt from their accounting days that "no" may well be a lie). According to another unheard of publication it appears that someone who is not on Reiman's side wanted an early view of the work that KPMG is doing. IKPMG is now suing a firm delighting in the name of Diligence, whose CEO used to work for those paragons of virtue; MI5. It would appear that a little cash was offered to help documents involuntarily make their way out of KPMG's offices. Here's the link.

In case you can't remember the point of all this (does it matter anyway?) here's a bare bones review. WSJ has a better review but its subscription only.

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04 March 2006

Russian Internet - Facts and Figures

Ethernet overtakes dial-up in Russia, from the RSS-friendly folks at Romir. Says as much about the quality of dial-up as it does the spread of Ethernet.

02 March 2006

Komstar Watch - Update

This piece from Vedomosti, the WSJ, FT and Independent Media JV, on Komstar's failure to disclose all known risks (Russian only.)

In essence Comstar,through MGTS, controls more than 25% of the fixed-line business in Moscow. Actually pretty close to 100% of the Moscow retail market, which is not unlike having your mother-in-law visiting. So Gossvyaznadzor, the regulator, has said that its prices should be regulated.

Which somewhat blow's a hole in the investment bankers theory that Comstar is well placed to benefit from de-regulation.

31 March 2006

Kommersant: Raw Mentality

I came across this story courtesy of Valleywag, a Valley (Silicon-type) online scandal site with an unhealthy interest in the love lives of the Google Two and the females who work there (though guys, you MISSED the Moscow office).

Back to the boring.  Valleywag picked up on  Sergey Guriev's claim in Kommersant that the most famous Russian in the US last year was Sergey Brin, not Khodorkhovsky, our very own VVP or any of the Fifth Directorate Thugs currently taking courses in basic economics courtesy of the Russian people.

I am inclined to agree with the basic premises of the article; namely that the West sees Russia very differently from the way that Russia sees itself.  But as a favor to you, my honored reader, I have edited out some of the more ridiculous statements to focus on the core of the argument;



“There are two separate Russias in the modern world. One is the Russia of the Russian media. It is an energy superpower rapidly returning to its former position in the world. The second Russia is the one in the Western consciousness. That is a corrupt, authoritarian country with a small economy, an unfit army and imperial ambitions. In that regard, Russia has come to look more like the Soviet Union in recent years. It is not just a matter of spy scandals and the nationalization of the petroleum and automobile industries. The perception of Russia, by both Russians and foreigners, has changed as well. As in Soviet times, those perceptions are again diametrically opposed.”

Guriev goes on to claim (and I am not sure that the argument hangs together) that Russia cannot survive on natural resources alone.  It is however, an argument that VVP certainly buys.



“Dutch disease of the mind is dangerous because Russia cannot have a long-term raw materials-based future. Oil, gas and metals cannot ensure sufficient income for a country as large as Russia, even at current prices. If oil prices fall in three or five years, due to a world recession, or stability in the Middle East or the introduction of energy conservation technology, the authorities in Russia will not be able to keep their promises to the voters and a political crisis will be unavoidable. And the change of governments will not necessarily take place constitutionally.”

The penultimate paragraph is very very good.  It reminds me of the Britain I grew up in and watched being changed in front of my eyes by Mrs Thatcher.



“Dutch disease of the mind is dangerous because Russia cannot have a long-term raw materials-based future. Oil, gas and metals cannot ensure sufficient income for a country as large as Russia, even at current prices. If oil prices fall in three or five years, due to a world recession, or stability in the Middle East or the introduction of energy conservation technology, the authorities in Russia will not be able to keep their promises to the voters and a political crisis will be unavoidable. And the change of governments will not necessarily take place constitutionally.”

See he just blew it in the last sentence.

My take is that Russia's educated youth is a lot more content than Guriev gives them credit for.  Though I question whether they should be and whether they have learnt too many bad lessons from their leaders.  In particular that it is stupid to work for money when it can be taken for nothing.

And the best thing about this post; technology and commodities all in one post.


[composed and posted with
ecto]


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More on Gerhard Shroeder in Russia

The Russia Journal performed a fantastic service by transcribing this piece from Ria Novosti in its blog.

Other than being written by someone in the Government for RIAN it alerted me to a little known due diligence procedure - talking to Reindeer herdsmen before accepting a job offer;



As always, Schroeder was accorded a hearty welcome in Russia. Before the NEGP Russian-German consortium stockholders meeting, he had visited the cold and remote gas-producing regions. Gerhard Schroeder met with locals, sat with Yamal reindeer-breeders in a chum (portable framework dwelling), and saw industrial facilities in action. This is in his nature - Schroeder always thoroughly studies the situation before making a final decision.

Some of the political analysis is a little baffling



Schroeder’s failure to get re-elected has not caused such dramatic consequences. Half of the current government leaders are his party colleagues, whose duty is to strictly monitor the implementation of the coalition agreement, which has sealed the main directions of his policy. Besides, the situation in Europe does not permit individual countries to “go wild”.

But I was in need of a smile to end the week.


[composed and posted with
ecto]


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Schroeder Named Chairman of Gas Pipeline

I had been searching for something a little scurrilous to post on today (note to self: evidently feeling better.) This mornings trawl through my feed reader brought nothing. A mid-afternoon decision to see what the Moscow Times was adding to the sum of human understanding unearthed the VVP/Schroder/Warnig pipeline love triangle. I would have been delighted to attribute it to the MT, however anything more than 24 hours old requires subscription so the Washington Post got the honour instead.

It's all so fantastically incestuous. Firstly Gerhard "brown paper bag" Schroeder gets inconveniently voted out of office. Instead of going on the speaking circuit (topic - how not to reform the German economy in 2 electoral cycles) he takes the brown bag offered by VVP who has a western lemming to point to when all does not go well. For those of you with a logical disposition (i.e. you aren't reading this post from the same country which it is being posted) it might seem logical that a prominent German should head a company which has significant German investment and the Russian state/GAZP as the majority shareholder. Unfortunately, Schroeder was invited to take the post by GAZP, or so he claims, to avoid the unpleasant assumption that he jumped from a badly-paid German government job to a (reasonably) well-paid German private one. It's just so much better if its a Russian one.

Add VVP's favorite investment banker as managing director and the menage-a-trois (its just not as sexy in German, or English for that matter) is complete.

I would like to point out that I have no issue with the pipeline, Germany's investment in it or GAZP's role. The economic/political rationale is sound. I just dislike the incestuous kleptocracy that inhabits the top of every country and when they don't even have the brains to hide it I worry for our countries.


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An Enemy of the People

I posted on the problems that Bill Browder was having getting back in to the country with my tongue stuck firmly in my cheek. Looks like its worse than that as reported here by the Economist and here by the Observer.

Whilst he is hardly the wealth-maker for Russia that he is portrayed to be; all his money is made for clients and, rightly so, himself. He has been banned as a potential threat to national security; frankly bizarre. He is a little abrasive and, as with many money-managers, a little egotistical. A threat to national security - no.

The Economist assumes that Bill's anti-corruption campaigning is the reason that he has been banned. That is, his desire to increase share prices of his favorite holdings through forcing non-market contracts to be turned in to market ones. I struggle to believe that the 5th Directorate Thugs are that stupid; history/evidence would suggest that I am wrong.

Sometime ago in struggling to understand the logic behind another bizarre decision I was helped by Vladimir Vladimirovich. He suggested that if Russia had to do something bizarre every now and then to keep us all on out toes.

As an associated thought its actions like this that give Illarionov's rants re cleptocracy some credibility, contrary to Konstantin's thoughts.

The Exile would not be my first choice for an objective economic analysis. The commenter is a little brutal but his point is well made. Avoid economic analysis when its clear that even Illarionov's grasp of economics is greater than yours. The first quoted paragraph shows such a weak grasp of commodity-driven economies that pre-University students would be failed an economics paper for it.


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25 March 2006

A New Russia-related Business Blog

As it is called the Russian IT blog you get the areas that it covers; Russian IT Industry:

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24 March 2006

Yukos Case Highlights Role of Foreign Banks

Rosneft: Caveat Emptor (3)

From the FT Yukos case highlights role of foreign banks.

Not only would a buyer of Rosneft (quasi non-)equity not be buying a "share" of the Company but would be buying it from western companies who "are actually building long-term relations with those forces in Russia that are destroying the very pillars of modern society: a market economy, respect for private property, democracy."


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Rosneft IPO - Caveat Emptor Update

Following my brief Caveat Emptor warning on Rosneft IPO this from the Prime-Tass website.

As the author notes;

After all, the outright exuberance among financial analysts and Russian and Western investors over Rosneft's IPO plans seems somewhat irrational. Sure, the IPO would open the state company to private investment, but lost in the enthusiasm for exposure to Rosneft is some common sense - after all, this is the same company that last year managed to make even Gazprom look like a transparent, efficient company. Rosneft's recent efforts to clean up its image - including a failed attempt to lure former U.S. Secretary of Commerce Donald Evans to become the company's chairman - should not obscure Rosneft's less-than-stellar past method of operating.

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23 March 2006

Court grants seizure of 1m euros

Filed under; many things you don't know about me;

Court grants seizure of 1m euros.

Could not happen to a nicer guy. I hope he spends years picking up soap in men only shower facilities.

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22 March 2006

VIP.N Alfa & Telenor

I'm a finance guy, albeit an early stage one, and I'm worried by the shareholder approach that says that Telenor should be a seller of Kyivstar and VIP.N so that it can return cash to shareholders. I tried two IB websites for some clarity - they are both on the outside now but are hoping that Spitzer-lite comments will get them a place at the table - so no clarity.

I can see that Vodafone should be divesting in negative-growth Japan and creating a solution in the US. These are both low growth markets. Ukraine, in particular, and Russia are not low growth. They are both simplistic telecom markets with no service culture. If investors in Telenor can generate higher returns than VIP.N and Kyivstar then don't invest in Telenor unless your Alpha-search is in excess of 4. It's what is known in game theory as a double-edged sword.

What I can see an innovative corporate financier (OK it's an oxymoron) doing is underwriting Telenor's buyout bid for Alfa's stake and then buying it out at an attractive premium. A switch from zero growth Japan to 20% growth Russia would be a redeeming move for Vodafone's management.

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BBC vows to reinvent web services

Not a headline that you would readily associate with the venerable Beeb.

BBC vows to reinvent web services.

I spent an entertaining half hour yesterday trying to explain why the BBC was not a good example to cite as a global media agency - in short it's shareholder measurement of return is based on EPS. What they have done though is get way out in front of the market in terms of using technology to enhance its content.

Long live advert fee license fees that someone else pays for.

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Russia China and Gas

To satisfy my ego, no more Sun-type headlines; my most visited posts have titles like IBM Targets Russian Developers. Seems the search engines prefer these to Investment Banking Whores Find New Boyfriends.

So the sub-text headline is: Russia and China Spout Hot Gas

There are enough links across the web to........., no good analogy comes to mind, but you get my point. My early morning reading chucked up two from the FT; Russia pledges gas pipelines to China and a subscription only piece from an Executive Director (no less) at the International Energy Agency - Claude Mandil. The long and short of which say that Russia has pledged two pipelines originating in western Siberia that will terminate in China. I even believed that they would allow gas to go down them. I am sure that the Japanese are thrilled by this - but then they got Sakhalin's LNG and are less willing to make soft loans to purchase Yuganskneftegas.


Mandil's op ed piece says that the Chinese contracts will impact western Europe's energy security because Russia/GAZP (whoever) needs to invest $11bn annually after theft (actually he didn't say that) to supply enough gas to honor both its European and Chinese contracts/commitments. What worries me about the headline is Mandil's Euro-centric view that Europeans have a right to the gas - he is French after all; Russia must act to avert gas supply crisis. A GAZP spokesman refutes his statement but you need to have an attention span longer than 5 minutes to get there. Mandil's point about the need for investment (and competence) is correct if European's aren't to spend significantly more on their gas from Algeria; albeit that will also be supplied by GAZP.


The last two links are from the Russia Journal, which used to be a newspaper and is now a supplier of good headlines for a slightly more Russophile point of view. Russia to remain the world’s energy donor and relevantly China gas supplies to end Russia’s European dependence.


Russia and Russians are proud of VVP's energy policy which I would summarize as; if you want to be warm, its time to treat us like grown-ups.


The problem with his energy policy is the problem of many if not most Russian businesses; the theory is fine but the execution is flawed. GAZP and Rosneft are not companies, they are ministries with a license to enrich their managers and stakeholders. Grabbing assets from bankruptcy is a fantastic one-time wealth creation scheme, creating a world class company requires more than having long dinners with tall girls.


Of the many things you don't know about me is that 18 years ago I studied nuclear deterrence and Russian politics (along with colouring in the Dandy and Beano). Carrying a big stick and talking softly is a fine policy as long as you are willing to use the stick; and demonstrate that willingness from time-to-time. A policy that requires Russia to be the "world's energy donor" also requires it to be the world's energy industry leader. With all due respect to the native cunning of the 5th Directorate Thugs it's not their natural environment.


Russia has every right to dispense its natural resources as it sees fit and base its foreign policy around their distribution. It runs the risk of wearing the Emperor's new clothes if it does not invest in E&P assets and the infrastructure to get the gas to markets.


Enough gassing.



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21 March 2006

Corus held merger talks with Russia's Evraz

What role Abramovich? Jose Mourinho for CEO? Corus held merger talks with Russia's Evraz:

Corus, the Anglo-Dutch steel company, has held talks with Evraz, Russia's largest steel producer, over a possible merger in a deal that would create one of the world's top six largest six steelmakers by volume, according to a person close to the negotiations.

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Global Outsourcing : Offshore Locations : Russia's High Value Call

A good piece on Russia's place in the global outsourcing world. The author is definitely more optimistic than I am. Global Outsourcing : Offshore Locations : Russia's High Value Call.

The stat that I like is the average monthly wage between Russian and Indian engineers - $8-14k/year vs $7-11k/year respectively. You might just get an American mathematician for $1k/month in Moscow but anyone who does not need help in turning on a computer is $1.5k+ (paid white). And wage inflation is definitely 10-15% p.a. Clearly Novosibirsk, Tomsk and the other Siberian cities are cheaper. But that's a hell of a long way to go to get an engineer. So very soon Russia will be significantly more expensive than an Indian (and the Chinese??) and will be trying to sell more quality at a higher price - if they can.

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20 March 2006

Moscow Refinery Wins Court Case

Actually it did not. It won a case in Russia which in effect says that if a Russian registered company willingly enters in to an agreement (otherwise known as a contract) whereby disputes are settled via arbitration, in this case in Stockholm, that has no impact in Russia. OilVoice.com | Moscow Refinery Wins Court Case.

Thus the cost of doing international business in Russia has just increased as it means that foreign arbitration has not weight under Russian law. It's not as though its a shock - this has been going on for a while. If Russian judges were better trained then the issue would be less important - but they aren't.

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Rosneft float ‘by October’

Caveat emptor. Buyers of shares will be providing cash in return for what precisely?

Clearly not any say in the Company, which includes when, where and how much of a dividend stream is provided as recompense for buying an option to capital appreciation. I am looking forward to the first squeal when Rosneft decides that its stakeholders are more important than the shareholders.

Rosneft float ‘by October’:
UNCERTAINTY over Russia’s biggest initial public offering (IPO) was swept aside after the government said last week state-owned oil company Rosneft would float “before the end of October”.

Putin rejects Barroso plan for ‘reciprocal gas access’

Putin rejects Barroso plan for ‘reciprocal gas access’ and quite rightly so. The customers aren't going anywhere, the pipelines aren't either - until LNG and/or GTL comes on line in the next 5+ years. In the meantime GAZP can acquire customers with its cash. Why would Russia agree to a social contract with Europe when Europe's not willing to create alternatives.

EUROPEAN Commission President Jose Manuel Barroso on Saturday confirmed that Russian President Vladimir Putin had refused his plea for European companies to gain access to Russia’s gas pipelines and reserves in exchange for access to Europe’s gas consumers and networks by Russian gas giant Gazprom.

19 March 2006

Hedge Fund Chief Can't Get to Russia

Seems like Bill is stuck in London until he agrees to what - stop telling the truth about GAZP? Hedge Fund Chief Can't Get to Russia:

Russia has been holding up an entry visa to William F. Browder, who controls a $4 billion hedge fund in Moscow.

18 March 2006

A Moscow Traffic Rant

Warning this post contains language that might be considered unsuitable for children and Moscow drivers (the mental age overlap is close to 100%) and the GAI (who don't have a mental age - unless using a electron microscope) and young Russian females whose ability to give blow jobs and talk on mobile phones is significantly in advance of their ability to drive (no coincidence says the man who gave them the car and the other man who gave them the license). Oh and the wanker who thinks that building more roads is a better plan than installing a traffic management system.


Over the last two days I have spent fucking hours and hours in traffic jams. Jams that could have been partially avoided by the use of a. a brain and b. an understanding of how wide your car is (particularly aimed at the Range Rover and Zhiguli driver who crashed head-on on Gagarinsky, a single lane road (actually its not a single lane road but as no one can parallel park it's become a single lane road) c. the ability to move in traffic d. a moronic desire to sit in traffic jams.


I mean for fucks sake we all have places to get to. A small (I mean tiny) application of the brain will get you there 3 times faster than sitting behind a trolley bus doing 30km/hour.


This is not a rant about a lack of society resulting in no road manners - its about a desire to get from a-to-b in the shortest possible time with the least hassle. Its a selfish desire that involves cooperating with others to get it done.


When I become President I will first, shoot on site all Volga drivers (no exceptions) followed by a selective culling of young, female drivers in expensive foreign cars who believe that it is possible to talk on mobile phones and drive in the pereulki around my apartment (you can guess the criteria) and finally all GAI - I think starvation would be a particularly appropriate way to go for the fattest community on earth (except the US.)


Rant over



Update - if you don't believe me enjoy this from Google Video


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16 March 2006

Doubts raised over Wimax's future

You don't say: Doubts raised over Wimax's future:




The much hyped Wimax technology may struggle to succeed says a report by the economic group, the OECD.


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A Moscow Traffic Rant

Warning this post contains language that might be considered unsuitable for children and Moscow drivers (the mental age overlap is close to 100%) and the GAI (who don't have a mental age - unless using a electron microscope) and young Russian females whose ability to give blow jobs and talk on mobile phones is significantly in advance of their ability to drive (no coincidence says the man who gave them the car and the other man who gave them the license). Oh and the wanker who thinks that building more roads is a better plan than installing a traffic management system.

Over the last two days I have spent fucking hours and hours in traffic jams. Jams that could have been partially avoided by the use of a. a brain and b. an understanding of how wide your car is (particularly aimed at the Range Rover and Zhiguli driver who crashed head-on on Gagarinsky, a single lane road (actually its not a single lane road but as no one can parallel park it's become a single lane road) c. the ability to move in traffic d. a moronic desire to sit in traffic jams.

I mean for fucks sake we all have places to get to. A small (I mean tiny) application of the brain will get you there 3 times faster than sitting behind a trolley bus doing 30km/hour.

This is not a rant about a lack of society resulting in no road manners - its about a desire to get from a-to-b in the shortest possible time with the least hassle. Its a selfish desire that involves cooperating with others to get it done.

When I become President I will first, shoot on site all Volga drivers (no exceptions) followed by a selective culling of young, female drivers in expensive foreign cars who believe that it is possible to talk on mobile phones and drive in the pereulki around my apartment (you can guess the criteria) and finally all GAI - I think starvation would be a particularly appropriate way to go for the fattest community on earth (except the US.)

Rant over


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15 March 2006

Investment Banking Whore's Find New Boyfriends

First Merril Lynch's Alan Vine joins Nafta Moskva board as Chairman. I expect that he will have the same success as all the other investment bankers reinvented as private equity guys - who cares the salary is fantastic. A couple moles in ML say that it may the most celebrated resignation this year/decade. Another IB to Private Equity jump is about to occur in the incestuous world of Russian private equity - but the news is embargoed to the end of the month.

Then Rosneft set to hire O'Brien to head IPO.

Investment bankers joining the PE bandwagon - a strong contra-indicator to continued strong growth?

Rosneft is preparing to recruit an American investment banker, Peter O'Brien of Morgan Stanley, as a senior executive to head the state-owned Russian oil giant's preparations for what could be the world's biggest initial public offering.

Russian PM presses for compliance with inflation schedule

I love the King Kanutian (sic) approach to one of the intractable issues in growing economies. Russian PM presses for compliance with inflation schedule:

You can sort of picture the scene (with apologies to Vladimir Vladimirovich):

Putin to Fradkov
Putin: Get inflation down to 8.5%
Fradkov; Yes master

Fradkov to Gref
Fradkov: Get inflation down to 8.5%
Gref: It's not quite that simple
Fradkov: What's so difficult about putting 8.5% next to the inflation figure
Gref: Well it's just that the very clever Mr. Breach might notice......

MOSCOW - Russia’s prime minister Wednesday called for the planned inflation rate of 8.5% to be kept to in 2006 amid concerns over the country’s economic performance at the beginning of the year. “We must adhere to the slated rates of consumer prices this year,” Mikhail Fradkov said at a Cabinet session.

14 March 2006

Everybody is in Everybody’s Business

Om is worried that Everybody is in Everybody’s Business. As he points out, it wasn't that long ago that "core competence" used to be the watchword(s) (sic). It's unlike Om to have missed the latest buzzword "edge." For once we aren't referring to networks but economics. There is no good consulting-speak definition of what people mean. Lacking the ability to come up with a phrase that sounds snappy, but ultimately meaningless, I have tried to explain it as the ability to make money out of businesses that are horizontal to your business. In discussions with a (very) solid and cool Magazine1.0 company which is trying to decide if there is a return in Web2.0 functionality in an emerging Internet economy. The straight ad $ returns are unspectacular - hence drive greater revenue through monetizing the eyeballs in other businesses. I guess that's where Google et al got to as well. Having conquered their part of the business the risk was that growth would turn very unspectacular - hence a trip in to - well where precisely?

One of the only endearing aspect of the 2001-to-2005 technology downturn was that people focused on their core business, and tried to build profitable franchises and stayed away from projects that were sure shot money losers. Well, no longer. Now everyone is in everyone’s business.
Google is going to sell books, taking on Amazon. Amazon in turn wants to take on Apple and do movie and music downloads. (Never mind no one is making money in that music download business except Apple.) Microsoft wants a piece of the Search action, and is going all guns blazing after Google, which in turn is going to try and do online word processing. Oh it will also do payments, taking on eBay’s Paypal.
Just thinking out loud - whatever happened to the core competency? Is the pressure of meeting the quarterly numbers and pleasing the Wall Street so much that companies are once again taking their eye off the ball. Jeff Bezos should be making sure that his online super-mart stays profitable instead of blowing up big dollars on a download service which may or may not become a big business.
Apple, for all its faults has that focus thing down pat. Okay maybe I am just being old-fashioned… hmmmmph!

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11 March 2006

Rostelecom to takeover VoIP provider Zebra Telecom

Rostelecom to takeover VoIP provider Zebra Telecom:

As the author points out below VOIP providers that terminate on the PSTN are being forced to do deals with incumbents just in case the valuation of Svyazinvest's privatization is depressed. Sad to see that innovation ends up in Rostelecom's hands.

Rostelecom reportedly acquired Zebra Telecom, which provides IP telephony and Internet access services, in a move to get closer to end customers and buy back lost market share.

Russia’s new telecom law that went into place officially on Jan 1 prohibits offering a VoIP service without meeting some requirements. Under the terms of the new law any VoIP originating or terminating onto the Russian PSTN, or that terminates internationally, must switched through one of the nation’s long-distance operators. Rostelecom is one of the incumbents that holds the license to provide long-distance service. Zebra Telecom and likes faced several options:

to make a deal with one of the incumbents;
to be acquired by incumbents; and
to become one of the incumbents by investing into the infrastructure to meet the government requirements to qualify as an incumbent.

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10 March 2006

March, 8 and [Equality], Domestic Violence

With many thanks to Konstantin for opening up the discussion on the overtly saccharine view of International Women's Day with his post March, 8 and Equality, (in its entirety at the bottom of the post.) I thought I had made it past the need to post on the most ridiculous holiday; but the itch would not pass. Whether American women (or Americans full stop) study enough science is beyond the point. March 8th is a game. It starts on February 23rd (or the day you get your first hormonal itches whichever comes sooner) and culminates in a 5-year-old-waiting-for-santa-to-arrive-fest on March 8th. It involves the same moral corruption and implicit bribery that Christmas does, but between adults. And it finishes in a haze of domestic violence fueled by grain and potato (I have the stats) and an unusual familiarity with the kitchen.

But beyond the obvious questionable notions of March 8th there are for foreigners some questions of etiquette that need to be answered. We've been here long enough to have escalated through chocolates and flowers to mobile phones and, according to BBC Radio4 Today Program, sex toys. We've learnt enough to know that the GAI also have to buy presents the week before so be on best behavior when driving. But how do you apportion your time between your wife and mistress?

The guess was that the evening of the 7th was for the mistress/girlfriend and the day of the 8th for the wife and family. Answers on a postcard......

I know that most of American and European women view the way Russians celebrate the 8th of March as machismo and anti-feminism. Why on earth human species with ovaries get gifts from human species without them? Before sneering at Russian women (and men) being so retrograde and so far behind from modern gender equality I would note that Russian women came to this “inequality” voluntarily and the hard way.

In the 1930’s the Soviet Union was far “ahead” in gender equality than any other country on earth. Being a housewife was almost a felony. Three months before birth of a child, three months after – and back to work. Salaries were strictly equal for men and women. Women were CEO’s, pilots, drivers, construction workers and heavy machinery operators. The 8th of March actually was a Soviet holiday to promote feminism and to glorify working women. Such capitalistic things as makeup, perfume or fashionable clothes – intended to keep women in imperialistic kitchen slavery – were frowned upon.

One of the things that surprised me greatly at American universities was that so few women (almost all of them foreigners) study engineering, accounting or medicine. I thought that American women, being so feministic, would love to study engineering. At school we were always told by our teachers that girls are better at mathematics and chemistry than boys.

Understanding that traditional gender roles were not capitalistic or imperialistic started in the USSR in the 1960’s and soon the 8th of March became, first, a kind of Mothers’ day and then as a holiday for every woman. Soviet women didn’t like the idea of being just human species with ovaries.

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07 March 2006

More From the Department of Strange Goings on In Russia Telecoms

As both these low-quality articles point out there is something a little fishy going on in the world of Russian Russian WiMax.

To save you your click through energy. A group that no one has ever heard of before suddenly obtained WiMax licenses for all of Russia. According to the second article (cunningly disguised as a link in WiMax) first had the money to invest and then maybe did not.

A non-serious question first:

What is it about telecoms that attracts fraudsters and the gullible?
What is WiMax?
And why are you interested?

More importantly and seriously:

Licensing - It's actually not that difficult to get your hands on licenses, and pan-Russia licenses are no more or less difficult than Region-specific ones. It's the terms that are killers. Pan-Russia licenses have deployment terms that are generally pretty impossible to match unless you have the cash lined up subject to licensing. Which, to-date in Russia, only happens if you happen to be creating the third mobile license from nowhere and Leonid Dodonovich is MinSvyaz. i.e. it's clear which is the chicken and which is the egg. Failure to meet license conditions in any one region negates the others. In short Russia's licensing regime is liberal provided you execute and draconian if you don't - or I don't like your tie.

Why use WiMax: Some would disagree with me, not least of all the very smart Elena at Baring Vostok who invested in Enforta earlier this year, but I am not a believer in WiMax as a solution for Russia's urban environments and here's why:

They are very densely populated (Tokyo-dense) which calls for scalable bandwidth (please don't quote theoretical throughputs)
Internet is the prime-driver but ARPU's are headed for $14 and double-play (Internet, visual data) will be needed
There is a much higher ratio (i.e. closer to 1:1) of outgoing/incoming traffic from early adopters (gamers) who much prefer being able to play Intranet than Internet
The past is not a predicator of the future.
I am not in favor of the investment theory that says we will acquire the customer with a cheap solution and upgrade the network as required - there is too much competition.

So I will join the ranks of the sceptical and back my hunch that bandwidth is the winner.

Reiman vs Alfa (and KPMG and Bermuda Ministry of Finance) - Update

As part of my public service in keeping you up to date with the goings on of Leonid (MinSvyaz) Dodonovich and Jeffrey "it was a mistake" Galmond here are a couple of links.

The first comes from one of My favourite publications Trusts & Trustees - all about Trusts, which I have been perusing to keep you up to date in telco scandal watch. It would appear that the Bermudan Ministry of Finance does not have enough faith in its regulator and has taken over the investigation in to IPOC. T&T alleges that Russian telecoms scandal edges closer to Putin though to be honest if the investigation has got this far VVP must be well insulated. Here's more from the Bermuda Minister of Finance.

In order to understand the pyramid scheme of outright lies and obfuscation, Bermuda retained KPMG forensic investigation team (the ones who have learnt from their accounting days that "no" may well be a lie). According to another unheard of publication it appears that someone who is not on Reiman's side wanted an early view of the work that KPMG is doing. IKPMG is now suing a firm delighting in the name of Diligence, whose CEO used to work for those paragons of virtue; MI5. It would appear that a little cash was offered to help documents involuntarily make their way out of KPMG's offices. Here's the link.

In case you can't remember the point of all this (does it matter anyway?) here's a bare bones review. WSJ has a better review but its subscription only.

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04 March 2006

Russian Internet - Facts and Figures

Ethernet overtakes dial-up in Russia, from the RSS-friendly folks at Romir. Says as much about the quality of dial-up as it does the spread of Ethernet.

02 March 2006

Komstar Watch - Update

This piece from Vedomosti, the WSJ, FT and Independent Media JV, on Komstar's failure to disclose all known risks (Russian only.)

In essence Comstar,through MGTS, controls more than 25% of the fixed-line business in Moscow. Actually pretty close to 100% of the Moscow retail market, which is not unlike having your mother-in-law visiting. So Gossvyaznadzor, the regulator, has said that its prices should be regulated.

Which somewhat blow's a hole in the investment bankers theory that Comstar is well placed to benefit from de-regulation.