Reuters Summit-Russia has PR fight to win on overseas ambitions
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MOSCOW, Sept 12 (Reuters) - Russian companies face strong resistance when it comes to buying assets overseas, but a combination of ambition and cash will ultimately win the day, business leaders at the Reuters Russia Investment Summit said.
“We have experienced this at our level. There is … discrimination against Russian business. But Russians can’t sit and blame the West for this. Their PR is bad, that is one of the big reasons,” leading Moscow-based financier Boris Jordan said.
Jordan, who helped advise on the country’s first privatisations in the 1990s and now runs a $2 billion private equity and advisory firm called Sputnik Group, is confident Russian companies won’t be deterred.
“We will see more Russian companies going abroad than foreign companies coming to Russia … You will see more cross-border deals involving Russian companies,” Jordan said.
He highlighted metals, mining and energy as sectors where Russian companies would continue to flex their muscle abroad.
“They have got strong national champions which are looking to expand,” he added.
A combination of strong cash generation and access to debt and equity markets has until now enabled Russian companies to make some big overseas acquisitions.
Earlier this year Norilsk Nickel , the world’s largest nickel and palladium miner, outbid Xstrata Plc to buy LionOre Mining for $6.5 billion. Russia’s steel and aluminium giants have also been on the acquisition trail.
But Russian gas exporter Gazprom’s expansion plans have caused concern among politicians outside Russia who have threatened to block any acquisitions because of the Russian state’s controlling interest in it.
Gazprom, the world’s top gas producer and supplier of a quarter of Europe’s gas, is actively looking to buy distribution assets in Western Europe.
CASH AND AMBITION
Another Russian company with global ambitions is services conglomerate Sistema , whose main assets are telecoms groups MTS and Comstar.
Vladimir Yevtushenkov, Sistema’s chairman, underlined that cross-border deals are only possible with political backing.
While Sistema could raise $10-12 billion in debt, in addition to the $7 billion it has on its balance sheet, if the right acquisition opportunity arose, any large purchase would require the buy-in of politicians in the target’s country.
Yevtushenkov said his attempt last year to create a “gigantic global company” with Deutsche Telekom came unstuck because it was a “sacred cow” in Germany, although he did not rule out doing a deal in the future.
For Russian officials, foreign resistance to Russian business expansion remains a frustration.
Kremlin economic aide Arkady Dvorkovich said that Russia was one of the world’s most open countries for foreign investment and Russian companies were no different to those in many other countries in having the state as a major shareholder.
Jordan warned that antipathy towards the so-called BRIC countries (Brazil, Russia, India and China) could ultimately harm world trade and that changes were needed to global institutions to reflect these countries’ increased importance.
“There is xenophobia against these countries (BRIC) in many ways,”Jordan said.
“The G8 needs to accept the fact there are other nations which are rising. If they are not given access to the instruments of power, then global trade will come to a halt.”
Filed by Ivana Jankovic under Multilateral Trade, Investment and Competition Policy, East-West Relations and Russia