Ruminations on Russia

However close your relationship with VVP is I for one would not want to take on Alfa Bank.

This fairly lengthy report from the Moscow Times details the latest back and forth in the ongoing spat between Alfa and Reiman that is being played out in the courts. Having been stymied by Jeff Galmond's bare-faced lies to a court in the British Virgin Islands, Alfa have convinced the German's to investigate the less than open relationship between Commerzbank and Telekominvest/TCI/First National Holdings (an entity that was on Commerzbank's balance sheet in 1999) under money-laundering rules.

I would guess that the fall out will be sufficient to condemn some ex-Commerzbank bankers now "working for" Jeff Galmand. Eventually Jeff himself will also be unable to travel to Europe. It should be fairly clear to anyone with half a brain that a very bad lawyer and a worse businessman did not suddenly end up with a pan-national mobile license for free without some "help."

My assumption is that proving the money-laundering charge will be very difficult, allowing Reiman and his close associates to escape censure in Russia. It is however, increasingly close to home for certain members of the Presidential Administration and I am sure that Alfa will struggle to win this set.

Just in case you happened to be on Mars for the last couple of weeks; there were a number of bombs in London on July 7th. 55 people have died so far.

So working on the theory that lightening does not strike twice in the same place, and that the original bombers were seeking an early meeting with the virgins, my wife and I are heading for London for a visa run (and the subject of a whole new post).

Which leads me to the point of this post; the relationship between Islam and Britain.

Some guides to my politics;

• I come from that part of UK society that make me a “Foreign Office Arabist”
• I have immense respect for Jewry but very little for the State of Israel
• There are very few areas of foreign policy on which George W. Bush and I would agree
• I know more people who have died from the results of terrorism than old age

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Technorati Tags: 7/7, UK

It was not the first, it will not be the last. That alone will ensure that London returns to normality within weeks.

As the apocryphal member of the IRA said to the apocryphal soldier in the early 90's;

"we only have to be luck once, you have to be lucky all the time"

2008 and the Lesser of Two Evils:
The Kremlin's current inhabitants have no knowledge of how to run a business or state. Yet they are highly professional in their ability to craft special operations and diversions and to manipulate public opinion. Operation Lesser Evil is right up their alley.

Wither Russia?

Or where has it been recently and where is it going?

The Financial Times had an editorial piece on Russia's forthcoming Presidency of the G8. As the author correctly pointed out, an organization that is dedicated to free markets and democracy should not be headed by a country whose support for both of the above is questionable.

The recent past has not been Russia's most glorious since 1992. The Khordokovsky affair was not good, what happened to Yukos was worse and is another example of wealth acquisition by a group who were not clever enough to do so the first time around, at somebody else's expense. In case that is not clear; it was Rapine pillage.

There are rumours that certain 5th Directorate Thugs are being reigned in. I personally don't believe it - but for clarity; the strong Russia natural resource policy is a smokescreen behind which some individuals are enriching themselves. Expect further bizarre behaviour that is clearly not in Russia's long term benefit. It will continue to make good FT/WSJ/NYT headlines to say that democracy is being hindered by media concentration and the direct appointment of Governors. At best the case is unproven that democracy has been harmed at all. Neither the media nor local politicians act in a way that is in anyway democratic. The instinct is anti-democratic; the outcome is open to debate. It's clear that the commanding heights (what a crass phrase. Try telling an entrepreneur that his chain of sandwich shops is not worthy of a commanding height) are being concentrated for the wrong reasons, but Russia is a country of 140mn people and the rising tide is making their Roubles available to all of us.

There will be battles over economic control whoever sits in the Kremlin for some time yet. Short-to-medium term policy is substantially more important. Which leads to my largest worry: Gref vs Fradkov (with Fradkov playing at home) Either Gref feels that he is strong enough to take on Fradkov, or so weak that it no longer matters that there is open warfare. The pessimist in me says the latter.

More important than the personal battle is the actual policy. In spite of Yukos, inward investment is picking up again; concentrated in autos and consumer sectors. Ford (apparently) has a 12 week waiting list to acquire a locally produced Ford Focus. Despite the increase in tariffs on foreign produced cars 2/3rds of all cars bought today were not made in Russia. There is growth evident in every aspect of the consumer sector. Cheese imports, for example, are growing 30% y-o-y (and that's just the reported imports.) Oil is no longer driving growth, it's impact is mostly being neutralized by the reserve fund and a taxation policy that is more favourably skewed to Russia than previously. Still inward investment is not stubstantial enough to kill off inflation driven by an excess of demand over supply. Russia's largest trading partner (the EU) is having a self-induced crisis, as is the $ (one induced by a political elite, the other by credit cards). So it does not matter whether the Rouble is appreciating or the $ and € are depreciating the result is the same. Rouble wages are not inflating as fast as real Rouble inflation. Whilst the Russian Economic Forum week in London is one of the best shopping weeks in London in the year (when did you ever see an underdressed Russian girl (except the strip clubs) Russia's growth is about the Roubles that are being spent by the people who are working for my wife (SWMBO) and thousands of mid-size businesses across Russia. The long awaited middle class. My gut feeling is that they are feeling poorer and less secure. The Ford statistics/rumours and the HUGE number of people going on holiday at Domodeydevo Airport today would not support my gut feeling. My only excuse is that a rising tide is adding to the people who get to go to Anatalyia for the first time, but those who have been through this process before are less secure. An economy that is grown on the seeds of oil, gas, gas, oil, steel and oil and an underserved consumer is storing up substantial problems for the future. In case anyone whose economics education extends beyond mine reads this guff tell could they tell me what happens when you have internal inflation as a result excess demand over supply, a current account surplus and substantial problems in your counterparts currencies.

So on one hand we have an investment climate that is tempered (good choice of word) by Yukos (not Khordokovsky,) Gazprom/Rosneft and directional insecurity and on the other a dynamic consumer sector that is crying out for investment.

Both medium-term (Private Equity) and strategic investors are bullish across a range of sectors. Portfolio investors are wary but then their access to Russia's real story is limited and the market will flit about on UES restructuring and GAZP de-ringfencing - which is not where money is being made today.

I think my money is with the long term investors. There will be good times, there will be better times and there will be worse times but even when the measure is not good my guess is that very little money will be lost.

Technorati Tags: Russia

No longer will this be Ruminations on Russian Tech and Venture Capital Investing but just plain Ruminations on Russia.

There will be a de-emphasis on the technology part, more on the joys of investing in this part of the world and more on this part of the world generally as viewed from my privileged window.

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Technorati Tags: Russia

A German in Moscow blogs his observation of two Mercedes bumping in to each other and the benefits of being able to call “supporters.”

Too add to the; it's summer therefore in addition to trying to kill myself with a combination of vodka and swimming (it's a break from vodka and ice-fishing during the winter) I'll try the summer sport of high speed crashes whilst failing to observe a. the rules of the road b. traffic lights or c. any form of “society” in which you might want to help your fellow man.

However, as a cynical observer and (eager) participant in the road rage game of; there are no rules but the ones that I am making up at the moment the likelihood of crashes comes with the territory. So as we headed to the Dacha (dacha; noun
a country house or cottage in Russia, typically used as a second or vacation home) two weekends ago we were involved in an incredibly low speed accident; we were stationery and the truck that hit us was going at least 3km/hr.

Usual story; traffic jam ahead - three lane road becomes a 5-7 lane road as we all try to get 5m further ahead of anyone else in a classic portayal of the zero sum game / prisoner's dilemma. We were in lane 4-5 1/2 (i.e. not one of the lanes that the Russian government has painted lines on the road to encourage us to use) and were trying to edge ahead of a large truck. We were trapped and the truck was not - result a 2m gouge down the side of the car.

Now the fun starts. After a crash you are not allowed to move your car until the traffic police arrive - we crashed at 13.30. they turned up at about 17.00. Fortunately the sun was shining so we sat by the side of the road. Once they had turned up it took another 90 minutes of form filling (and 3500 rubles to “expedite” matters) to get a form from the police to use with the insurance company.

Pictures to be added on my return from Novosibirsk.

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Technorati Tags: Russia

A blog from a Peace Corps volunteer in Andijon, Uzbekistan where latest “revolution,” apparently this one is Cotton, is or is not underway. She has now been evacuated to Tashkent.

I like her take on the background to the troubles;

It would be “reductionist” to interpret this as a purely religious movement, or a drive for democracy. I maintain that the worsening economic situation for the general population, coupled with increased taxation, systemic corruption, and a host of other factors converge into a force of disobedience that leave no other choice, no other outlet for people who need to find a way to improve their lives, even if it means risking it. There's not much else to lose...

I defy you to agitate a man on a full stomach

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Kevin Laws from Venture Blog on the similarities between Peacocks having sex and making VC investments; Why Are Startups Like Peacocks?

I take his point that signaling in the VC world, as opposed to the Peacock sex world, can be ultimately disadvantageous especially when taken to the extreme. However, its pretty hard to argue a company is doing well unless some of the signals are being flashed. Nothing makes people happy like revenue, especially when its early and in greater volumes than expected, which is not like.......an analogy too far.

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Jeff Nolan ordered a Sonos Digital Music System. I man-handled three back from the US in to Moscow and am the happiest music bunny out there. As it says on the Sonos website you can play it anywhere, and you can play different music in different places at the same time.

In over a month of regular use I have had no problems with it at all. A HUGE fan.

Russell Beattie asks what is PalmOne celebrating exactly? And then gives PalmOne a due smacking for its Treo. I am a 650 owner - OK PDA, very bad phone.

I take mild issue with the conclusion. The winner is not Nokia or Sony/Ericsson, Moto etc but RIM, Good, M$soft (Exchange 2003 upgraded w/ push service) and, interestingly, Sonus and Broadsoft.

I am not pro-M$oft but the free ActiveSync upgrade to 2003 Exchange Server is a great idea, just 5 years too late. The option to IT managers; buy a b'berry server et al or a smartphone and a good email client. And they will still go b'berry. You don't get fired for buying what everyone else is.

This too good to miss - Romanian hides stolen mobe in vagina. As with all mobiles in public places stick it on vibrate....

Glenn Fleishman on the death of TelSym. I can't say that I am hugely surprised. They were trying to fill a market position that was in constant flux and has not even begun to settle down. I watched them quite closely at the time because we spent a fair bit of time trying to figure out a business plan for a similar company. We passed because we could not figure out how to make money from a smart company. Same was true of TelSym. They had a bunch of financing to ensure that they had to worry less about hitting the wall. When it came more money slammed in to it.

In the same week that they failed a possible answer to their woes. I am a Skype-sceptic and cannot quite shake my feeling that nothing has changed since I voiced my skepticism last year. Today I heard from a friend with more knowledge than most of security-related issues that his SkypeOut account identity had been stolen and the contents of his account spent on calls to Australia. He points out that your account's security is based purely on a password. Not a great way to keep cash online.

I'll go back to why I don't think Skype is the answer; security and maintaining call state to provide applications. If TelSym had not been so arrogant maybe they could have hung around long enough to find nirvana.

Russian universities two in first three and three in top ten; which includes Izhevsk, which to the best of my knowledge has the honor of producing my excellent receptionist and little else.

A Russian friend working in the Valley forwarded me this report. He has a PhD in something complicated and a 7-year old son. He is worried that the public-education that he is giving him will qualify him to be a lawyer, consultant or investment banker but certainly nothing that requires 2x2 being equal to 4 at all times.

I'm damned if I can import the chart and keep the formatting so you will have to find the standings here. The top 13 included 5 Universities from Russia, 5 from China (not bad on a comparative per head of population basis,) and 5 from Europe. The first US university/ies came 17th=. By which time a bunch more Russian, Belorussian and Chinese Universities had also joined the list. It is true that the average standard of education across Russia is falling rapidly. In a comparative report sponsored by the OECD has the average level of mathematics in Russia and the US at the same level. The statistic seems to me to be out, but as a trend it's difficult to argue with. Yet at the top end the trend is clear. Russia and the CIS is the world's leading powerhouse in mathematics. That strength is beginning to show up in complicated programming problems and has been recognized by (inter alia and/or principally) Intel, Motorola and Boeing. And I mention them because they were the principal players in Tuesday's poorly attended session on high technology at the Russian Economic Forum. The panel was led by Sergei Kravchenko of Boeing who stated in his opening comments that VV Putin wanted Russia to catch-up with India's $12bn in exported IT services. Russia's export services in 2004 amounted to a paltry $0.5mn. Ex-Komsol leaders like Kravchenko are unlikely to publicly disagree with Our Great Leader.

The comparison is misleading. Not that Russia's export services are paltry, they are, but that India is Russia's competitor. It seems unlikely that an Indian design team will be responsible for 1/3 of the Boeing 7e7 or 777, or build Motorola's phone software development which is being developed by a great company in Nizhny Novgorod. Nor would Intel go to Indian scientists to sort out RF issues with the Centrino chip, after their Israeli development team ran in to issues. But even that maybe missing the point. No one refers to the quantity of export services from Israel. Instead Israel's high tech success is measured in companies that raise venture financing and go public on NASDAQ. This is where Russia should be competing. Where the comparison is meaningful is that competition to provide intellectual services is global. Nearly all of Russia's competitors provide inducements of one kind or another to build outsourcing centers. Russia cannot assume that its intellectual abilities alone will create demand for its scientists.

REF is Russia's leading big business conference. Everybody who is anyone is there which means that the best attended event is coffee. It may also have something to do with the fact that Russians are not great at listening to what others have to say. I had intended to try to blog the sessions that I attended. Power sockets were slightly rarer than rocking horse shit and there was not a WiFi connection to be had for love nor money. So instead here is this consolidated impression and some specific thoughts on the technology session in another post.

My leading and most useless observation impression is that Russian presenters have improved little over the preceding 10 years. Lack of structure, verboseness and irrelevance were the hallmark of the majority of the speeches from Russian presenters. My second impression is the overwhelming negativity of the majority of the Russian participants. Maybe the only happy guys at the whole event were the money managers; Bill Browder of Hermitage Capital winning the award for most overwhelming positive speech (paraphrased - the things that the press worries about are overblown from a stock market perspective). Boris Fyodorov, Honorary Chairman of UFG, a Russian investment bank, and a board member at Gazprom definitely won most logically optimistic speech (paraphrased - things have been a lot worse and are actually pretty good right now; GDP growth, budget surplus etc.)

Sitting somewhere in the middle was Bob Dudley, CEO at TNK-BP, who told a story of substantial investment in the opportunity that is natural resource exploitation in Russia but worried that the business climate was getting worse and worse. Brian Gilbertson, formerly CEO at BHP-Billiton, and now CEO at SUAL did not really touch on the business environment. However, his subsequent statements to the press where he stated that SUAL would probably not seek a London listing because the Russian government did not look kindly on foreigners owning strategic reserves spoke volumes for what he really thought.

At the far end of the spectrum Misha "2%" Kasyanov, Andei Illiaronov and Boris Nemtsov launched in to a blistering attack on the government. The theme of all three was effectively the same; lack of continuing reform is really hurting economic progress. Misha "2%" in his "I'm standing for President in 2008" speech extended the criticism to every element of society. He may have a point, in fact he probably has a very strong point. However if the best that big business can muster to force a quasi-democratic discussion with those inside the Kremlin is a man whose moniker is 2% then we probably should not be holding our breath for a non-Putin blessed successor in 2008. I am assuming that the political world knows that there is little chance of beating Putin's anointed successor so rather than be damned in the process of failing they will put up a candidate who has no chance of winning anyway.

It does however illustrate the paucity of the level and purpose of the debate. The Russian businessmen presenting were all beneficiaries of "loans for shares." LFS was a bribe to big business in 1996 to get Yeltsin out of an electoral hole. Having succeeded the Government would like its economy back. To the extent that they are improving Russian business it is in their hiring of western businessman to run their cheaply-acquired assets. The concentration of assets in the hands of a few men (22 people control 40% of the economy) makes them a political liability and the means by which they acquired their wealth does not make them natural allies of the clean-hands school of business.

Not a single senior member of the Government or Presidential administration turned up. Apparently it was because Kasyanov was due to speak in a key note speech. It is a mark of their failure to understand that debate can be beneficial to policy that only lends credence to the criticism that they are not much better than a bunch of 5th Directorate Thugs.

After all is said is done it was great to catch up with guys who have been playing Russia for a while.

It's been a while since I have had the energy or inclination to take on a larger subject. The complexities of IP protection and rights in Russia, and to an extent Ukraine, have been exercising my grey matter for a while. To be clear this is not an attempt to engage in any beneficial lobbying for the software, film, music industries. With both Russia and Ukraine somewhere close to the top of the list of countries that peddle in pirated goods. M$oft, the music and film industries are already effectively lobbying the government. The issue in Russia is not about the law but the enforcement of it. In Ukraine the law needs to be implemented. What this post is about is the region's ability to turn its undoubted mathematical and scientific achievements in product-driven companies that compete in global markets.

So what is the problem that vexes the tiny group of us engaged in financing and developing high tech markets in Russia and Ukraine. The good news is that, in Russia at least, patent laws are well developed and clearly and definitively adhere to international norms. There is even a suggestion that they are actually well written, though that is beyond my competence to judge. As an entrepreneur or academic wishing to protect an invention specifically in Russia it is relatively easy, and cheap, to apply for a patent from RusPatent and subsequently to prosecute believed infringements of that patent. The process of transferring patents and patent applications owned by Russian firms to foreign ones is also very straight forward; as you would expect in a country that has no balance sheet recognition of soft/intangible assets. As with many aspects of Russian law the courts ability to understand and make coherent decisions based on the law may be lacking. As I have written before there are a number of international bodies training Russian judges and lawyers to help them make coherent decisions. As judges remain significantly under-paid they will remain vulnerable to bribery especially at the lower end of the judicial chain.

Russia's domestic firms are not major consumers of technology, and especially Russian developed technology. Nor have they developed the ability of Huawei, for example, to copy and turn out Cisco-like products. The lack of entrepreneurial and management abilities that mean that so much Russia-related technology remains unlocked potential also means that intellectual property theft is fairly low-level and certainly no greater than the usual academic spats over original ideas.

The issue that is frequently insurmountable relates to ownership of ideas. Many of the truly disruptive ideas that we come across in our trawls through the local high-tech universe were born in Universities and other government-funded high tech institutes and firms. The current Minister of Science and Technology has been trying to lay out the ground rules as to how to assign ownership rights but like many reforms they are being roundly ignored at the operating level.

By way of an example. A company which we are doing some background due diligence on, and we have to like it to be doing this work, is based on an invention by a core group of scientists which itself is the subject of a patent which in turn refers to the Institute at which they were working at the time of the invention. This patent was written before the collapse of the Soviet Union and so was the property of the State. No great issues so far. The company on which the invention is founded is willing to cede some ownership to the Institute in recognition of its role in funding the discovery. But as the discovery was funded by the State actually the property belongs to the Ministry of State Property. And that is where the black hole starts and continues into infinite nothingness. The Ministry cannot take ownership in private companies and certainly not in ones that are created in Delaware. It cannot transfer its ownership back to the Institute but continues to insist on its ownership rights. So this would appear to be circular black hole where we continually arrive back at the starting point.

Given what would very likely be a legal opinion that would focus on the inherent negative in financing a company which probably does not own its invention another disruptive technology will probably stay on the shelf.

Nothing differentiates people more than what they eat for breakfast. Northern Europeans are keen on cold meats and cheese on brown and rye bread. My own homeland is rightly famous for the heart attack inducing fry up. Russian's however, are partial to pickled garlic (in brine in case you are curious.) Each to their own. Except that pickled garlic is not to its own. Everyone gets a piece of it.

If you are now to understand that I am on a full plane to London from Moscow you will understand that my aversion to Pickled Garlic has risen to the top of my current hate list.

I am not Catholic; I have no truck with organized religion. As Jared Diamond points out in "Guns, Germs and Steel" organized religion is a necessary pre-condition for inter-community/state organized violence.

To the extent that I have a Church, I am a Scottish presbyterian who was always led to believe that the Papists were actually the Devil's form on earth. Actually it had more to do with the football team that you supported. So the Pope as the head of the Devil's church was never really top of my Christmas card list.

Whatever his views on marriage, contraception and the other half of the population (women) he had the guts, political strength and following to tell Poles;

"You are men. You have dignity. Don't crawl on your bellies."

It was the start of the end of Communism.

From Kommersant, St. Petersburg's Research Center is the latest way for someone to receive cash for owning a crappy piece of real estate and deprive deserving scientists of R&D funds.

As the article points out less than 15% of all funds earmarked for a project in Dubna actually ended up funding R&D.

Could someone in charge please understand that building business parks for science start-ups is worthless unless they have management talent that is going to find contracts and a pool of venture experience to help those managers go global.

Om Malik (as if you need to know where to find him) posts on hefty sales of chips for wireless chip manufacturers of both memory and DSP chips, everyone bar Intel, effectively. And the $ value per chip is only going to increase as the requirement for chips in converged "handsets" increases. Multiple radios, not only across today's, tomorrow's and the day after that's mobile and fixed wireless networks but increasingly linked to WiFi as well as having Bluetooth (and UWB?) capabilities.

That's a geometric increase in processing power in handsets whose battery life is improving arithmetically. The challenge will be to build integrated software/hardware systems that are highly energy and form factor efficient without sacrificing processing power. The mathematical abilities that are today housed in Russia and Ukraine are already providing the algorithms (linked to a definition just to remind you of what we are talking about - it's not just mathematics) and in some cases the links to hardware systems that will solve some of these problems.

Reconfigurable computing is probably the answer and if you doubt me read this from Steve Pawlowski an Intel Fellow on what it means to have "one radio that defines multiple radio standards".

Somewhere in this space amongst the plethora of work that is being done in Russia and Ukraine right now is a deal that will be done in 4Q 2005.

Yesterday German Gref, Minister for Economy, Development and Trade (MEDT) yesterday announced that the government was dropping its 8.5% inflation target and raising the target to 10% (Not sure how durable this link is.)

Also yesterday we got close to closing our annual negotiations to rent our dacha for 2006 we have agreed with our somewhat batty landlady that her real inflation is closer to 20% than it is 10%. What gives?

Is this just Moscow related inflation with the more backward parts of the country, partially yes, but I feel that it has more to do with a number with games played between a limited number of players with imperfect information.

Whatever, the real cost of living in Moscow in going through the roof and salaries reflect this, not reported salaries which represent between 5-50% of actual salaries, but cash out every month. A common bitch among business owners (principally expat) these days is that salary demands are completely out of sync with experience and ability. This is not a Russia is going "to hell in a hand basket" post but an attempt to provide a micro review of an economy that only has macro players.

This is the third and by far and away the best of the saying no stories from Bill Burnham.

I will admit to being as bad as anyone at saying no early enough. Usually because I like what a company is doing but when it becomes time to think about convincing others that it is a good idea reality strikes. At which point the no becomes an effort in self-justification.

My best no however, was to a guy who is now a good friend. I liked his company, his product, the market and was getting ready to make a proposal when I met the new CEO. We did not invest, the CEO was fired within a year and the Company was sold for its patent portfolio.

Jeff Nolan at SAP Ventures posts on consolidation in the enterprise software industry.

Here we have an expert, or very well-informed writer (depends whether you believe that VC's can be experts!) writing a concise overview of some trends in the enterprise software industry without the requirement to tell an "interesting" story. The likelihood of finding a similarly well-written informative piece in the mainstream media are limited.

Furthermore it does not take more than 5 minutes of skimming through Jeff's blog to understand his general point of view and thus to put his piece in to some perspective.

Good piece.

Slava Johnson from Chadbourne & Parke's Kyiv office has written a great piece on the future of Ukraine under Yushenko.

In particular she highlights just how many established interests he is going to have to bring onside to get his way and the fact that he has just a year to do so. Considering how difficult it has been for Putin to implement his reforms in Russia versus an established bureaucracy and regional fiefdoms with a popularity rating that has stayed over 60% even during the social payments fiasco at the beginning of the year. Yushenko, by contrast is the President of a divided country from which he is struggling to remove the epithet bitterly.

She starts down the road of debunking the US financing of the Orange Revolution albeit does not really nail the point. In short there was US money that helped but it was only there because Putin's thugs gave them the opportunity.

This week; I returned to Ukraine for the first time since Yushenko was formally recognized as President, Kyrgyzstan, a country I have never been to, overthrew its post-Soviet, Soviet leaders and Putin announced a moratorium on (inter alia) the loans-for-shares privatizations. The temperature also crept above 0 on Thursday and the sun shone; unfortunately there is no tool to link the sun to the investment mood. Sitting in the traffic yesterday the two were indelibly linked.

Was Putin's announcement yesterday akin to false hopes of spring as we return to winter today (snow), or have the liberal economists in the convenient guise of Gref and Kudrin started to win the war? And are they winning battles or the war? And just where and on what issues were those battles fought? Does being humiliated in Ukraine (please notice the absence of the definite article) really have a positive economic effect in Moscow? After all in Ukraine the Orange Revolution is seen as the victory of Ukraine's millionaires over its billionaires. Please suspend any conversations about democracy until the pudding is on the table.

Is Putin's charm offensive PR-led, or is it reality? Being burnt by PR-led good news is second nature to investors in Russia's public markets. However, my broker friends tell me that their government relations people have been hearing good news for a while. I have blogged too often recently about failures of the 5th Directorate thugs to be anything but happy about their demise, however temporary.

Boy is this a difficult post.

So in the week that; another "friend of Russia" was toppled by dollar-inspired people power, that the hope of a new future permeated both Kyiv and Kiev and Putin publicly swung back to the liberals which is going to impact making money the most? Putin's announcement should top that list by some way. Ukraine is emerging from the dark ages, Kyrgyzstan is still feudal and there is no obvious link between democracy and wealth creation - ask the Chinese.

For all the carping about progress in Russia over the last 6-9 months it is still a country mile ahead of its nearest neighbors. Retreating rapidly to an area where I have some opinionated knowledge rather than just opinions; technology. IP laws here are mostly well-drafted if yet to be enforced. Academia is increasingly being funded. In none of Russia's neighbors is this the case. If your trade is short-term it may be better to buy Ukraine than Russia, something to do with buying the rumor selling on the event. If however, investment time horizons are slightly longer than tomorrow; Russia seems a better bet.

And all this in the week that "Old Europe" defeated the Services Directive. How long before we read the first comparisons of Russia's liberal economy compared to Germany and France's restrictive model?

This is either the first week of spring or another false dawn in an increasingly long winter. The weather outside is not promising; something tells me that Russia's economy is going to be rosier.

Putin is apparently concerned about the size of businessman in Russia.

Or is that he is concerned about small business in Russia. So lot's of grand statements are made but as Siberian Light points out the bureaucrats (Chinovniki) are just following his lead;

And he is right to say that much of the problem is with regional authorities. Most of obstacles that small businesses face are met at the local level - bureaucracy, demands for bribes, etc. But some of the blame has to go right back up to Putin, who is in the process of setting up a political system based on patronage rather than accountability. If corruption at the highest levels is increasing, how does he expect it to begin decreasing at lower levels?

As a crap presenter, and as the recipient of crap presentations, I am fascinated by the advice given to create more focused presentations. Whilst Roger's comments are specifically tailored to pitching VC's the basic theory still applies. If you have a 1 hour meeting and 30 slides then at best that's 2 minutes a slide. Do a rehearsal and work out what 2 minutes a slide feels like. Imagine yourself to be on the receiving end of a new slide every 2 minutes. Then factor in questions. Now reduce the number of slides by at least 60%.

And just because you have less slides does not mean that you should cram more onto the slide. I hate investment banking slides which have so much info crammed in to them that I spend 3 minutes trying to determine what's important and then I need to understand why it's important and on the third slide I stare at trying to get the information to leap off the page my concentration slips. I know that I should be professional enough to work through that but I am just human. It's not dissimilar to running meetings in Russian. I have to concentrate so hard that the moment I am not giving it 100% I am getting nothing.

I had a boss who had learnt his presentation skills in a consultancy; i.e. very busy with each slide containing 5 slides worth of information. But they were rescued by a strip line which stated the take away from the slide.

If you don't believe me try reading;

Beyond Bullets and this post from Brad Feld the comments to which are a complete link fest.

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Winter

The end of this winter is turning out perfectly. Let me paint you a comparative picture;

New England etc; that indescribable late autmn russet color that Robert Lowell never found words for in his madness

Scotland; The first green at the end of a long winter when the sun shines and is warm and hope (and sex) is in the air

and thus the end of a Russian winter can be two things and unfortunately they are not mutually exclusive; crystal clear, cold and beautiful or grey, with clouds a centimeter above your head and large puddles of melt with last winters dog shit and cigarette butts reaching for the surface.



The glass is half full at the moment. My study window faces on to the back of the Ministry of Foreign Affairs ("MID") one of Stalin's 7 Wedding Cakes or more commonly Visotkas.

The camera on my Treo 650 does it no justice. The view is crystal clear and utterly beautiful.

It's always fun to watch a family coming apart at the seams, particularly when that family used to sup together as 5th Directorate KGB thugs (pace Medvedev). The back and forth, up and down (viz whore's draws) of the Gazprom (GAZ.P), Rosneft (traded nightly in expensive restaurants in Moscow) and Yuganskneftegas has actually reached a level of slapstick humor that Benny Hill would do well to emulate. A brief recap in case you have spent the last 10 years buried in a polar ice cap:

1. The Soviet Union spends huge amounts of money discovering oil in Siberia
2. The Soviet Union falls apart
3. Well connected members of the young Komsomol do off with large chunks of cash and create a quasi-banking type institution
4. The Russian government parks some of its meagre cash flows with the aforementioned quasi-banking type institution
5. Vladimir Potanin takes a sabbatical from his own FIG (financial-industrial group) to parcel out some/all of the states juiciest assets in a deal called "loans-for-shares"
6. Yuganskneftegas becomes the jewel in the crown of Yukos, a loose affiliation of warring clans which also included; Samaraneftegas, Tomsneft and a couple of other bits and pieces. Price paid; whatever government monies we had in our bank at the time the bid came up.
7. Lots of unpleasantness some quasi-legal some involving rapid and fatal injections of lead before Yukos finds religion and becomes transparent; i.e. it works out that the market value is greater than the cash flow it can appropriate.
8. 31 December 1999 President Yeltsin resigns. VV Putin steps in to the breach.
9. Four-ish years VVP later replaces deeply compromised competence with 5th Directorate thugs (his friends). The Prime Minister was commonly known as Misha 2%.
10. First Lebedev and then Khordokhovsky go to jail.
11. Yuganskneftegas is stripped from Yukos because it could not pay its tax bill, except it could.... to be bought by...
12. Baikal Finance, a company whose registered address is a hairdressing salon in buttfuck nowhere...
13. Which was then acquired by Rosneft, a state-owned oil company run by a certain Bogdannichov. A CEO who would go down well with Enron, WorldCom etc shareholders
14. Lots the "cheque is in the post" follows when it becomes clear that Rosneft can't afford to buy YuganskNG but the Ponzi scheme comes through in the end

14. A Houston court (don't ask) decides it does not have jurisdiction (clearly, and I did not spend any time at law school)
15. Alexei Miller, Gazprom's CEO and Sergey Bogdannichov announce in a recorded statement on two tame state channels (there aren't any wild ones) that they have come to a long-awaited agreement as to merger
16. Then Rosneft says in a press release that the pre-agreed statement was wrong
17. Then the Press Release was possibly rescinded because Bogdannichov was "on holiday" - presumably the pressure of making his first TV program
18. Then it was denied that it was rescinded
19. Then it was announced that the Kremlin was going to make a statement.........but it hasn't