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3 June 2013

Is Russia Imperialist?
As Leon Trotsky observed in the Transitional Program: “Imperialism means the domination of
finance capital.” We are agreed that the imperialist world system operates to channel wealth
from relatively backward countries to the elites of the “developed” capitalist countries. Those
countries that are active participants in what Trotsky referred to as “the expansionist policy of
finance capital” (a policy at least partially mediated through a complex web of international
political and particularly economic institutions) can properly be considered imperialist.

A century ago, Tsarist imperialism was a hybrid of dynastic Romanoff 19th century
“imperialism” and the modern financial capitalist operations of Russia’s bourgeoisie in
neighboring more backward countries. At that time, Lenin observed, Russia’s military clout, like
that of its somewhat more advanced Japanese rival, supplemented and partially offset its relative
economic backwardness.

Russia today plays little or no role in key global institutions established after World War II
through which imperialist policy (e.g., the “Washington Consensus”) is developed and
implemented in the neocolonies. Russian banks and corporations have derived no benefit from
the give-away privatizations imposed by IMF “structural adjustment” policies. Nor does the
Russian bourgeoisie operate a separate, or parallel, state system, in which it dominates and
oppresses weaker countries. There are no mechanisms, beyond the sale of oil and gas at world
market prices, by which Russia extracts wealth from less developed countries on any significant

It appears that the only time Trotsky explicitly discussed the criteria by which to determine
which countries were imperialist was in 1938 in the context of a discussion of the position
revolutionaries should take in the event of a military conflict between Czechoslovakia and Nazi
Germany. Trotsky stressed the importance of “finance capital” and pointed to Czechoslovakia‘s
highly developed industrial capacity, as well as its alliances with other imperialist powers:

“I believe that Czechoslovakia is a small country and in the event of war her existence would be
directly threatened [my emphasis]. But the difference between Czechoslovakia and France lies in
the fact that France has colonies. It is an imperialist country. Czechoslovakia has no colonies. But
this difference is only apparent. Czechoslovakia is an imperialist country in every respect. It is a

highly developed country with finance capital in a leading position in a very concentrated
industry, the very important war industry. This is why Czechoslovakia is a developed capitalist
country, but not only that. In Czechoslovakia we now have a population of about 15 million. It is
not a big country. Under European conditions it is a medium-sized country.”
. . .

“I forgot to add that Czechoslovakia is a partner of a world corporation of imperialist countries. If

it doesn't have colonies, it has loans from Britain. These loans are possible because of Britain's
colonies; likewise with military support from France. It is a link in the imperialist chain.”
—LTWritings, 1937-38, p. 353, 356

Russia is certainly not a link in any imperialist chain. Nor can finance capital be said to be in a
leading position, for reasons outlined below. Nor is the Russian economy highly developed,
despite the fact that in a few specialized fields, particularly military, its inheritance from the
Soviet degenerated workers’ state allows it to produce world class goods. For the most part,
however, Russian products are not competitive on the world market. Nouriel Roubini, an
insightful analyst who was among a handful who predicted the 2008 financial crash years before
it occurred, provided the following thumbnail sketch of Russia’s economic situation in the
aftermath of that event:

“The weakness of the Russian economy and its highly leveraged banks and corporations, in
particular, which was masked in recent years by the windfall brought by spiking oil and gas
prices, burst into full view as the global economy tumbled. Saddled with a rust-belt infrastructure,
Russia further disqualifies itself with dysfunctional and revanchist politics and a demographic
trend in near-terminal decline.”
—“Another BRIC in the Wall?,” 15 October 2009
Russia has the attributes of a large and (because of its Soviet inheritance) militarily formidable
power which is able to play a major role in global politics. It is also a country with enormously
valuable natural resources. At the same time the development of the Russian bourgeoisie (and its
ability to reduce the gap separating it from its more advanced capitalist rivals) is deformed by
cultural backwardness and bureaucratic corruption. In a 2010 report on “The state of Russia” the
Economist wrote:

“By 2005 the bribes market, according to INDEM, a think-tank, had risen to $300 billion, or 20%
of GDP. As Mr Khodorkovsky said in a recent interview, most of this was not the bribes paid to
traffic police or doctors, but contracts awarded by bureaucrats to their affiliated companies.
“Unlike private businessmen, who started to invest in their core businesses (Yukos among them)
in the late 1990s, bureaucrat-entrepreneurs have little incentive to do so. Their wealth is
dependent on their administrative power, rather than newfangled property rights. The profits are
often stashed away in foreign bank accounts or quickly spent: on luxury property in European

capitals, or on their children's education in British private schools. All this is inevitably
accompanied by anti-Western rhetoric and claims of Russia's resurgence.
“Unsurprisingly, surveys now show that the young would rather have a job in the government or
a state firm than in a private business. Over the past ten years the number of bureaucrats has gone
up by 66%, from 527,000 to 878,000, and the cost of maintaining such a state machine has risen
from 15% to 20% of GDP. At the same time, Russia's standing in indices of corruption, property
rights and business freedom has deteriorated. “
—Economist, 9 December 2010
The Russian economy is both integrated into the world market and overwhelmingly dependent
on resource extraction, particularly hydrocarbons. Revenues from oil and gas sales in the past
dozen years have tended to mask the problems at the core of Russian capitalism, particularly a
failure to diversify economically and an inability to produce commodities that are competitive

“Corruption was also excessive in the 2000s, but it was compensated for by strong economic
growth and fast-rising incomes. This, and soothing television pictures, created a sense of stability.
But the global financial crisis hit the Russian economy harder than that of any other large
industrial country, exposing its structural weakness. As Vladislav Inozemtsev, an economist,
argues in a recent article, the improvement in living standards was achieved at the cost of massive
under-investment in the country's industry and infrastructure. In the late Soviet era capital
investment in Russia was 31% of GDP. In the past ten years Russia's capital investment has been,
on average, about 21.3% of GDP. (For comparison, the figure over the same period in China was
“Despite rising oil prices and a construction boom, Mr Inozemtsev says, in the post-Soviet period
Russia has built only one cement factory and not a single oil refinery. The Soviet Union used to
build 700km of railways a year. Last year, it built 60km. ‘We have lived by gobbling up our own
future,’ he argues. Peter Aven, the head of Alfa Bank, the largest private bank in the country,
thinks today is like the late Soviet period: ‘Once again the main source of wealth is oil and gas,
which is being exchanged for imported goods.’”
While generating immense profits, Russia’s oil and gas sector is technologically backward by
world standards. When Lukoil (a major Russian producer) won a contract to develop a portion of
Iraq’s oil fields it had to subcontract most of the work to a U.S. firm (see Appendix A “In
Rebuilding Iraq’s Oil Industry, U.S. Subcontractors Hold Sway”). American authorities claimed
the fact that Iraqi contracts mostly went to foreign oil corporations proved that the conquest of
Iraq had nothing to do with seizing oil assets. They were well aware that U.S. companies, with
their advanced technology, stood to reap most of the benefits: “While Baker and its American
peers are poised to make significant profits from such work in Iraq, wafer-thin margins seem to
await Lukoil….”

This phenomenon was described in the “Theses on the Eastern Question” adopted at the Fourth
Congress of the Comintern in December 1922:

“The progress of indigenous productive forces in the colonies thus comes into sharp contradiction
with the interests of world imperialism, since the essence of imperialism is its exploitation of
the different levels of development of the productive forces in the different sectors of the
world economy, in order to extract monopoly super-profits.”

—emphasis added

Russia’s rulers enjoy relative independence both from imperialist economic penetration
and the political control that goes with it, but this is not sufficient to qualify as an
imperialist power. To a considerable extent this “independence“ is a product of social
dysfunction—investors steer clear of places where the judicial system cannot be relied
upon to enforce contracts and ensure payments.

Turkey, Venezuela, India and various other non-imperialist countries have also periodically
asserted considerable political independence from Washington and its allies in recent years. In
1917 No. 29 we discussed the possibility of a U.S. defeat in Iraq resulting in Iran emerging the
primary “regional power“ in the Persian Gulf.

I. Large Ogopolistic Corporations: Russia & Brazil Compared

In his 6 April 2011 preconference document arguing that Russia should be considered an
imperialist power (the most recent statement of that view that has been circulated) comrade
Decker pointed to an “economy dominated by large oligopolistic corporations (combining
banking and industrial capital)”:

“Russia has several massive corporations listed in the Forbes 500, including in the banking, steel
and telecommunications sectors. Most importantly, of course, are oil and natural gas: Gazprom
was the 16th largest corporation in the world in 2010, while Lukoil was 69th and Rosneft was

He added that “Sberbank (93rd) and VTB Bank (437th) are large Russian financial institutions,”
and rounded out the list with “Severstal, the largest steel company in Russia, is 313th” and
Novolipetsk Steel (390th),” another steel producer.

The current Forbes 500 lists nine Russian companies—two thirds of them gas and oil
corporations, including five of the top six. The other major BRIC capitalist economies hold a
roughly similar position: six Brazilian and ten Indian ten corporations are listed. The Brazilian

and Indian companies are less heavily weighted in resource extraction than their Russian
equivalents. Brazil’s six entries, coincidentally, have roughly the same market value as Russia’s
nine. In general the Indian firms are ranked somewhat lower (see Appendix B).

The BRIC countries are grouped rather closely in terms of entries on Forbes list ogopolies. It is
notable that Russian entries (7 of 9) are resource companies, whereas four of the six corporations
from Brazil are in the financial sector, including one “Major Bank.” All other BRIC financial
institutions are categorized as “Regional Banks.”

The fourth “BRIC” state—China—has 39 entries on the list, more than the other three combined
and second only to the U.S. which has 160. Britain is in third place (30), followed by France (27)
with Germany and Canada tied for fifth (23 each).

II. Foreign Direct Investment: Russia & Brazil Compared

A second criterion posed by Decker’s 2011 document was:“Does Russia have an exploitative
‘finance capital’ relationship with neo-colonial countries?”There is no question that substantial
amounts of Russian money is sent abroad, but this is not necessarily evidence of imperialist
activity. The pattern of foreign investment by Russia closely parallels that of Brazil, and is
distinct from core imperialist countries like France, Canada, et al. Attachments 1 & 2 are scans
of several documents that provide important information about Russia’s foreign holdings,
particularly in comparison to Brazil’s. (The first of these, a 2008 Deutsche Bank report, was
extensively cited in Decker’s 2011 contribution.) Some of the texts have been abbreviated to
include only only those portions that seemed most relevant. For ease of reference the scanned
pages have been numbered sequentially.

The documents are the following:

1. “Russia’s outward investment” by Deutsche Bank, 30 April 2008” <p1-6>
2. “Russian outward FDI [Foreign Direct Investment] and its policy context”, Columbia FDI
Profiles, 13 October 2009 <p 7-15>
3. “The growth of Brazil’s direct investment abroad….”, Columbia FDI Perspectives, 17 August
2009 <p16-19>
4. “Inward investment in Russia and its policy context,” Columbia FDI Profiles, 30 November
2010 <p20-32>
5. “Russia’s emerging multinational companies amidst the global economic crisis,” Dr. S.
Filippo, Delft University, 21 January 2011 <p33-38>

Passages that seem particularly significant are marked. The following comments related to
information in the scanned documents (with references to page numbers being those written in
the lower right corner.)

“Russia’s outward investment” by Deutsche Bank

P 2 Note that Russia has only 6 companies rated as “global challengers” compared to 20 for
India and 13 for Brazil (footnote #4).
P 3 Russia’s share in ODI (outward direct investment) by “emerging markets” is estimated at 9%
for 2006, but as Table 5 on page 4 shows emerging market ODI was only 13% of the total, so
Russia’s share of total ODI was approximately 1.2% of the total—hardly what one would expect
from an “imperialist” country with the world’s 6th largest GDP (PPP adjusted). Even if this was all
money invested in attempts to realize higher rates of profit than available domestically (which
most of it is not, see below) it would still portray Russian “finance capital” as only a very minor
factor in the world economy.
P 4 In fact very little of the 1.2% of global ODI that originated in Russia is invested. Most of it has
been sent to Cyprus (37.5%), Luxembourg (26.7%) and other financial centers only to later be
returned to Russia in a tax evasion maneuver known as “round-tripping” (see footnote 16 on
page 4 and Table 9 on page 5).
Russian companies have a major market share in the CIS “due to linkages already in place in the
Soviet Union as well as a lack of foreign investors from elsewhere” (the lack of other investors
presumably due to unstable domestic situations in many cases.) Telecom companies as well as
energy companies require “on site” capacity which is perhaps why they are prominent among
the holdings of Russian investors. But the percentage of Russian investment going to CIS
declines sharply as total Russian ODI grows—from 59% of the total in 1997-99 to 12% in 2004-
P 6 Table 12 shows that Russian investment abroad is overwhelmingly concentrated in oil/gas
and metallurgy sectors. The reasons for investing (outlined on p 3 of the Deutsche Bank paper)
include a desire to upgrade technological and managerial capacity, gain easier access to foreign
capital investment, and avoid the political uncertainty and “difficult business and institutional
environment” at home. Such considerations do not normally shape investment decisions by
imperialist corporations based in North America, the EU and Japan.

“Russian outward FDI and its policy context”, Columbia FDI Profiles
P 7 Russia’s economic resurgence since 1999 due to “consistently high prices in its main export
products” (particularly oil and gas) resulted in direct investment abroad.
P 8 Russian ODI was $208 billion in 2008; Brazil’s was $162 B; Russian investment in CIS grew
from $.13B in 2000 to $10B in 2008. (But the majority of this went to Belarus, see Table 4 page
P 9. State companies play “an important role in Russian OFDI” [outward foreign direct
investment]; many Russian capitalists want to avoid domestic political instability by moving
capital abroad. (Not the usual motivation of imperialist investors, beyond tax avoidance). Note

that two-thirds of total ODI flowed to “international financial center such as Cyprus, the
Netherlands, the British Virgin Islands and Gibraltar, which partly serve as tax havens for Russian
firms as well.” (See Table 5, page 14).
P 10 Some former Soviet bloc countries are antagonistic to Russian investment.
P 13 More than three quarters of Russian M&A (merger and acquisitions) involve firms in
“developed countries” rather than neo-colonies, CIS etc. This is similar to the usual proportion
for corporations from the U.S., etc.
P14 Russian investment in CIS countries in 2007 and 2008 was overwhelmingly concentrated in
Belarus, which at that time was a close ally. This implies that political, rather than economic,
calculations were dominant. See Appendix C “Belarus Bailout Hinges on Russia” in which the
author quotes an analyst’s observation that “Financially, Belarus is becoming another South

“The growth of Brazil’s direct investment abroad….” Columbia FDI Perspectives

P 17 There are close parallels between Brazilian and Russian FDI—in each country tax havens
account for roughly two-thirds of the total. The remaining investment also follows similar
pattern—predominantly going to “developed” capitalist countries, presumably for similar

“Inward investment in Russia and its policy context,” Columbia FDI Profiles
P 20 Corruption discourages FDI in Russia. What investment there is tends to be in big urban
centers and oil and gas regions.
P 21-2 Much Russian FDI is simply “round-tripping” laundered money; CIS countries invest in
Russia because of preexisting Soviet networks etc.; foreign MNE (multinational enterprises) help
modernize Russian industry with technology transfers.
P23 Russia’s economy was heavily impacted by global financial crisis; “Many of the largest
Russian private companies demonstrated that they could not survive without state support.”
Russia is high on the corruption scale, which is not typical of imperialist countries, but common
among “emerging” economies with large “informal” sectors.
P 25 Russia is ranked 63rd in global competitiveness, 143rd in economic freedom: “both Russian
and foreign large investors usually solve their problems with the bureaucracy in informal ways”,
i.e., there is no reliable legal mechanisms for adjudicating property disputes.
P 27 There is a fairly close parallel between inward FDI stock in Russia and Brazil.

“Russia’s emerging multinational companies amidst the global economic crisis”

P 34 This list shows only two Russian companies among the top 50 in Europe and only four in
the top 100—all of them oil and gas firms. The next two largest companies on this list are also oil
and gas concerns. If Russia’s population of 140 m makes up roughly 28% of the total population
of Europe (including all of Russia) the fact that Russian companies make up such a small
percentage of the top firms (4% of the top 100, 5% of the top 200, and 6% of the top 500) is
indicative of Russia’s relative economic backwardness. The proportions are doubtless reversed

for France, Germany et al (i.e., their share of firms in the European top 500 is a multiple, rather
than a fraction, of their percentage of the continent’s total population.)
The dominance of resource [particularly oil and gas] extraction for Russia is of course more
characteristic of “developing” rather than “developed” economies.
P 37 “While the economic crisis has halted the foreign expansion of Russian private capital,
state-owned capital strengthened its position as an investor.” Once again a phenomenon more
commonly associated with “developing” rather than “developed” capitalist economies.

III. Russia & Brazil: Marginal Players in Global ‘Finance Capital’

In terms of institutions of “finance capital” neither Russia nor Brazil play in the first division, as
indicated by the absence of both countries from a list provided by the authors of a 2011 study of
“The Network of Global Corporate Control” by Switzerland’s premier institute for
macroeconomic research, the Eidgenössische Technische Hochschule in Zürich (ETHZ). This
study (posted to DISC on 10 May) powerfully confirms Lenin’s contention regarding the
tendency of capitalism toward monopoly, expressed as the ever increasing domination of the
global economy by “a small tightly-knit core of financial institutions” (p1). Using mathematical
systems modeling to investigate “the architecture of the international ownership network” the
ETHA found a “super-entity” at the center of which “only 737 top holders accumulate 80% of
the control over the value of all TNCs” (transnational corporations). A smaller group of 147
TNCs hold “nearly 4/10ths of the control over the economic value of TNCs in the world” (p 6).

The study lists the top 50 “control holders,” 45 of which are financial institutions. No Russian (or
Brazilian) corporations are included. There are two entrants from the Chinese deformed workers’
state, but all the rest are from “advanced capitalist” (i.e., imperialist) countries: 24 from the U.S.,
8 from Britain, 5 are French, 4 Japanese, 2 each are German, Canadian and Dutch and the
remaining one is Italian.

The Swiss study seems considerably more sophisticated than the standard rankings of global
financial institutions, but the pattern is similar. Appendix D, a list of the world’s 35 top banks
based on market capitalization (as of 23 August 2011), includes four Brazilian banks but only
one Russian one. Most of the banks on the list are from the “developed” capitalist world (as well
as six from China) (www.relbanks.com/worlds-top-banks/market-capitalization-2011).The
picture is essentially the same in ratings of banks by assets. Of the top 50 six are Chinese and the
rest are from “developed” capitalist countries, with the sole exception of Banco do Brasil which

stands in the 49th spot (see Appendix E— www.relbanks.com/worlds-top-banks/market-assets-
2012). No Russian bank appears on that list.

IV. Russia’s ‘Underdeveloped’ Pariah Capitalism

American authorities issued the following downbeat assessment of Russia’s financial sector in

“Although still small by international standards, the Russian banking sector before the crisis was
growing fast and becoming a larger source of investment funds. To meet a growing demand for
loans, which they were unable to cover with domestic deposits, Russian banks borrowed
heavily abroad in 2007-2008, accounting for 57% of the private-sector capital inflows in
2007. …

“Even with the banking sector’s recent growth, financial intermediation in the overall
economy remains underdeveloped. Contradictory regulations across the banking and
securities markets have hindered efforts to transfer resources from capital-rich sectors,
such as energy, to capital-poor sectors, such as agriculture and manufacturing. The sector is
dominated by large state banks, and concentrated geographically in Moscow and the Moscow
region. Thus financial service providers face little competition for resources and charge relatively
high interest rates for favored, large corporate borrowers.

“This state of affairs makes it difficult for entrepreneurs to raise capital, and banks generally
perceive small and medium commercial lending as risky. Most of the country’s financial
institutions are inexperienced with assessing credit risk, though the situation is improving. The
low level of trust, both between the general public and banks as well as among banks, makes the
system highly susceptible to crises. After an uncertain year in 2009, by spring 2010 Russian
officials announced an end to anti-crisis bank support, and a World Bank report said that ‘a
systemic banking crisis had been averted, the liquidity crunch eased and depositor confidence
reestablished.’ The report cautioned, however, that systemic weaknesses exposed during the
crisis—especially excessive dependence on foreign borrowing and non-performing loans—
still needed to be addressed.”
—U.S. State Department Country Survey on Russia, 16 March 2011, emphasis added

Heavy dependence on foreign borrowing is typical of countries with relatively “underdeveloped”

economies. In Russia, like other BRIC countries, state-owned banks predominate (see: “Banking
in BRIC Countries,” 9 August 2010, Knowledge for Markets (www.ftkmc.com/newsletter/Vol1-
21-aug09-2010.pdf). The same report notes that among the BRIC banks “a study of key

performance ratios reveals that ROA (Return on Asset) is the highest for Brazil banks and much
lower for Russia.” According to the European Bank for Reconstruction and Development
Russia’s private sector’s share of GDP shrunk from 70 to 65 percent between 2004 and 2010:

“Despite large-scale privatizations, the seven existing state corporations still play a large role in
the Russian economy. (Note: State corporations are 100% owned by the Russian government and
operate under special legislation. The Russian economy also features thousands of other
companies owned in part or whole by the Russian government that operate under different legal
arrangements, such as unitary enterprises and joint stock companies.) While private enterprises
are technically allowed to compete with state corporations on the same terms and conditions, in
practice, the playing field is tilted. State corporation holding structures and management
arrangements (e.g., state representatives as board members) make it difficult for private
enterprises to compete. Furthermore, specific legal constructions can result in preferential
treatment of state corporations.”
—“2012 Investment Climate Statement – Russia,” U.S. Bureau of Economic and Business Affairs

The level of corruption in Russia has been an enormous drag on economic development:

“Corruption, including bribery, raises the costs and risks of doing business. Corruption has a
corrosive impact on both market opportunities overseas for U.S. companies and the broader
business climate. It deters international investment, stifles economic growth and development,
distorts prices, and undermines the rule of law. Moreover, the NGO Information Science for
Democracy (INDEM) estimated in a 2009 report that bribes and corruption annually cost Russia
the equivalent of one-third of its GDP. In November 2010, President Medvedev announced that
Russia is losing up to a trillion rubles (approximately $33 billion) annually due to corruption in
its state procurement system.”

This reality has inhibited both foreign and domestic investors:

“While Russia's peers in the BRIC group of leading emerging economies are coping with an
inflow of capital, $21 billion fled out of Russia in the first ten months of the year. Unlike foreign
firms such as Pepsi...Russia's private firms are too nervous to invest in their own economy.”
—Economist, 9 December 2010
In 2011, a government development bank, Vnesheconombank, launched a special new fund
designed to lure overseas investment. To reassure skittish capitalists this private equity fund was
headed by a former Goldman Sachs banker and personally backed by then prime minister
Vladimir Putin whose “personal involvement in the fund is intended to reassure investors that
they will not be abused by arbitrary or corrupt lower-ranking officials” (see Appendix F “New
Fund, With Ties to Kremlin, Seeks Foreign Investors”).

But even Putin’s personal guarantee was not enough and Russia’s ailing financial sector has
remained a major problem for the Kremlin. The 2012 U.S. State Department report cited above
stated that “most large Russian companies choose to list their stock in London and elsewhere
abroad in order to obtain higher valuations.”

A 20 February 2013 article, entitled “$500,000 Makeover Not Just Cosmetic,” report was
published in Russia Beyond the Headlines, a government-funded “Special Advertising
Supplement” that appears in more than a dozen major international papers, including the Wall
Street Journal, New York Times, and London Telegraph. The article, (see Attachment No. 3)
begins: “In a new image campaign, the Russian government has hired investment bank Goldman
Sachs to persuade investors and ratings agencies of the country’s appeal.” It continues:

“Sberbank Pesident German Gref has complained publicly that Russia is underestimated in the
international rankings. (In terms of financial sector development, Russia lies in 134th place in the
World Economic Forum’s competitiveness ranking, below Albania, Armenia, Botswana, and
Peru.) “
The Goldman Sachs PR team faces a formidable challenge, particularly as Russian capitalists
themselves lack confidence in their future:

“growing numbers of the elite feel that the present political and economic model has been
exhausted and the country is fast approaching a dead end. ‘The problem is not that this regime is
authoritarian, the problem is that it is unfair, corrupt and ineffective,’ says one leading
businessman. ‘Corruption will erode and bring down this system.’ The paradox is that few
Russian government officials disagree with this.”
—Economist, 9 December 2010
This depressing assessment of the predicament of “actually existing” Russian capitalism is
confirmed by a recent report in the New York Times that things have become so grim that
Moscow’s stock exchange has recently been having difficulty competing with Warsaw’s for
regional financial center:

“The midsize companies in neighboring Ukraine or other former Soviet republics are choosing to
go public in Warsaw. They are hardly bothering to look at the carefully laid out welcome mat in
The report continues:
“Mr. Medvedev had named senior Western bank executives to an advisory council for
transforming Moscow’s financial sector. They included Jamie Dimon, the chief executive of
JPMorgan Chase; Vikram S. Pandit, the former chief executive of Citigroup; and Lloyd C.
Blankfein, the chief executive of Goldman Sachs.

“But the Global Financial Center Index, published in March by Z/Yen, a consulting agency,
placed Moscow 65th out of 79 cities studied. London was first, followed by New York and Hong
Kong. The ranking placed Moscow between Bahrain and Mumbai.”
—“Moscow Tries to Reinvent Itself as Financial Hub,” New York Times, 3 April 2013
(reproduced as Appendix G)

The market capitalization of the Moscow’s MICEX/RTS stock market circa January 2012 was
$844 billion, compared to Warsaw’s $157 billion. Brazil’s Sao Palo’s MB&F—the eighth largest
exchange in the world—had a valuation of $1,188 billion (see: www.world-exchanges.org).

. . .

On balance the evidence indicates that the “actually existing” Russian bourgeoisie is no more
imperialist—in the Leninist “modern [i.e., finance capitalist] sense”—than their Brazilian

Appendix A
In Rebuilding Iraq’s Oil Industry, U.S. Subcontractors
Hold Sway
By ANDREW E. KRAMER June 16, 2011<published in Friday 17 June NYTimes, emphasis added>

MOSCOW — When Iraq auctioned rights to rebuild and expand its oil industry two years ago, the
Russian company Lukoil won a hefty portion — a field holding about 10 percent of Iraq’s known oil

It seemed a geopolitical victory for Lukoil. And because only one of the 11 fields that the Iraqis
auctioned off went to an American oil company — Exxon Mobil — it also seemed as if few petroleum
benefits would flow to the country that took the lead role in the war, the United States.

The auction’s outcome helped defuse criticism in the Arab world that the United States had invaded Iraq
for its oil. “No one, even the United States, can steal the oil,” the Iraqi government spokesman, Ali al-
Dabbagh, said at the time.

But American companies can, apparently, drill for the oil.

In fact, American drilling companies stand to make tens of billions of dollars from the new petroleum
activity in Iraq long before any of the oil producers start seeing any returns on their investments.

Lukoil and many of the other international oil companies that won fields in the auction are now
subcontracting mostly with the four largely American oil services companies that are global leaders in
their field: Halliburton, Baker Hughes, Weatherford International and Schlumberger. Those four have
won the largest portion of the subcontracts to drill for oil, build wells and refurbish old equipment.

“Iraq is a huge opportunity for contractors,” Alex Munton, a Middle East analyst for Wood Mackenzie, a
research and consulting firm based in Edinburgh, said by telephone.

Mr. Munton estimated that about half of the $150 billion the international majors are expected to invest
at Iraqi oil fields over the next decade would go to drilling subcontractors — most of it to the big four
operators, which all have ties to the Texas oil industry.

Halliburton and Baker Hughes are based in Houston, as is the drilling unit of Schlumberger, which is
based in Paris. Weatherford, though now incorporated in Switzerland, was founded in Texas and still has
big operations there.

Michael Klare, professor of peace and world security studies at Hampshire College and an authority on
oil and conflict, said that American oil services companies were generally dominant both in the Middle
East and globally because of their advanced drilling technology. So it is no surprise, he said, they came
out on top in Iraq, too — whatever the initial diplomatic appearances.

United States officials have said that American experts who advised the Iraqi oil ministry about ways to
restore and increase petroleum production did so without seeking any preferences for American

And immediately after the 2009 auction round won by Lukoil, the United States Embassy spokesman in
Baghdad, Philip Frayne, told Reuters that “the results of the bid round should lay to rest the old canard
that the U.S. intervened in Iraq to secure Iraqi oil for American companies.”

But Professor Klare said that the American officials who had advised the Iraqi government on its
contracting decisions almost certainly expected American oil services companies to win a good portion
of the business there, regardless who won the primary contracts.

“There’s no question that they would assume as much,” he said.

The American oil services companies, which have been in Iraq for years on contract with the United
States occupation authorities and military, are expanding their presence even as the American military
prepares to pull out.

For example, Halliburton, once led by former Vice President Dick Cheney, has 600 employees in Iraq
today and said in a statement that it intended to hire several hundred more before the end of the year.
“We continue to win significant contracts in Iraq, and are investing heavily in our infrastructure,”
Halliburton said.

The 11 contracts Iraq signed with oil majors, including the six for the largest fields, are intended to raise
Iraqi output from about 2.5 million barrels of oil a day now to 12 million barrels daily in 2017. Some of
the oil services contracts are for repairing currently productive fields, others to tap mostly unused sites.

Most outside experts, including those at the International Energy Agency in Paris, are skeptical of the
production targets. The I.E.A. predicts that Iraq will not surpass six million barrels a day until 2030.

But there is little question that production is ramping up. On average in 2002, the year before the
United States invasion, Iraq produced only 1.9 million barrels of oil a day.

Lukoil’s experience in Iraq shows how, while geopolitics steered the primary contracts largely away from
United States oil companies, the process left the subcontracting wide open for American service

Lukoil was originally granted rights by Saddam Hussein, in 1997, to develop a huge field called West
Qurna 2 — rights that Mr. Hussein rescinded just before the war began in 2003.

After the invasion, Lukoil sensed that its best chances lay in working with the Americans. It formed a
joint venture with the United States company ConocoPhillips, giving Conoco a small venture in the
Russian Arctic and ceding it part of West Qurna 2.

By the time Lukoil was eventually compelled to bid again for the field at the 2009 auction, sentiment in
both the United States and Iraqi governments seemed to have shifted to favoring non-American
companies in awarding the main contracts. But one of Lukoil’s first steps after securing the West Qurna
2 deal was to subcontract the oil well refurbishment work to Baker Hughes.

While Baker and its American peers are poised to make significant profits from such work in Iraq,
wafer-thin margins seem to await Lukoil and the other international oil producers — which include BP
of Britain, CNPC of China, ENI of Italy and the Anglo-Dutch company Shell.

Lukoil’s contract, for example, is typical in paying a flat fee of $1.15 for each barrel produced, regardless
of oil’s price.

That means even if Lukoil ramps up West Qurna 2 production from almost nothing now to 1.8 million
barrels a day by 2017, as specified in the contract, it will require more than a decade of subsequent
production just to recoup capital costs of about $13 billion. A good portion of those costs, meanwhile,
will have gone to its drilling contractors. Lukoil says it intends to drill more than 500 wells over six years.

Lukoil and other winners of the 2009 auction are now quietly seeking to renegotiate the deals by
slowing the upfront investment. On Wednesday, Lukoil executives met with Iraq’s oil minister in
Moscow, the company said in a statement. A spokesman declined to provide more details.

Andrei Kuzyaev, the president of Lukoil Overseas, the company’s subsidiary for foreign operations, said
in an interview that he was choosing oil services contractors in Iraq through open tenders, as required
by the contract. But in fact, Lukoil officials say privately, only American companies have bid.

“The strategic interest of the United States is in new oil supplies arriving on the world market, to lower
prices,” Mr. Kuzyaev said.

“It is not important that we did not take part in the coalition,” he said, referring to the military
operations in Iraq. “For America, the important thing is open access to reserves. And that is what is
happening in Iraq.”

Appendix B
FORBES 500 entries for capitalist BRIC economies:
Russia, Brazil and India
# 17 Gazprom
“Oil and Gas Operations” Sales $144 B Profits $40.6 B Assets $339.3 B Market Value $111.4 B
# 59 Rosneft
“Oil and Gas Operations” Sales $68.8 B Profits $11.2 B Assets $126.3 B Market Value $73.2 B
# 61 Sberbank
“Regional Banks” Sales $36.1 B Profits $10.8 B Assets $441.1 B Market Value $73.3 B
# 64 Lukoil
“Oil and Gas Operations” Sales $116.3 B Profits $11 B Assets $99 B Market Value $55.4 B
# 159 TNK-BP Holdings
“Oil and Gas Operations” Sales $43.3 B Profits $7.6 B Assets $43.3 B Market Value $33 B
# 187 Surgutneftegas
“Oil and Gas Operations” Sales $23.4 B Profits $7.2 B Assets $51.4 B Market Value $33.7 B
# 233 VTB Bank
“Regional Banks” Sales $16.1 B Profits $2.8 B Assets $210 B Market Value $18.9 B
# 385 Norilsk Nickel
“Diversified Metals and Mining” Sales $12.8 B Profits $3.3 B Assets $18.8 B Market Value $32.9 B
# 484 Tatneft
“Oil and Gas Operations” Sales $13 B Profits $2.1 B Assets $19.5 B Market Value $14.8 B

# 20 Petrobras
“Oil and Gas Operations” Sales $144.1 B Profits $11 B Assets $331.6 B Market Value $120.7 B
# 42 Itau Unibanco Holding
“Major Banks” Sales $70.5 B Profits $6.2 B Assets $453.6 B Market Value $82 B
# 45 Banco Bradesco
“Regional Banks” Sales $78.3 B Profits $5.6 B Assets $417.5 B Market Value $71.6 B
# 67 Banco do Brazil
“Regional Banks” Sales $69 B Profits $6 B Assets $552.2 B Market Value $37.9 B
# 87 Vale

“Iron and Steel” Sales $45.7 B Profits $4.8 B Assets $130.4 B Market Value $92.7 B
# 173 Itausa
“Conglomerates”—“Holding company primarily involved in the financial sector”
Sales $27.8 B Profits $2.2 B Assets $172.4 B Market Value $25.4 B

# 121 Reliance Industries
“Oil and Gas Operations” Sales $70.3 B Profits $3.9 B Assets $64.2 B Market Value $50.4 B
# 136 State Bank of India
“Regional Banks” Sales $35.1 B Profits $3 B Assets $359.1 B Market Value $28.1 B
# 155 ONGC - Oil & Natural Gas
“Oil and Gas Operations” Sales $28.9 B Profits $5.5 B Assets $52.1 B Market Value $50.5 B
# 309 Icici Bank
“Regional Banks” Sales $13.2 B Profits $1.5 B Assets $118 B Market Value $22.8 B
# 334 Tata Motors
“Auto and Truck Manufacturers” Sales $32.6 B Profits $2.7 B Assets $27.6 B Market Value $15.9 B
# 350 Indian Oil
“Oil and Gas Operations” Sales $70.8 B Profits $0.8 B Assets $43.2 B Market Value $14.2 B
# 377 Coal India
“Diversified Metals and Mining” Sales $12.3 B Profits $2.9 B Assets $20.8 B Market Value $37.4 B
# 384 NTPC
“Electric Utilities” Sales $12.8 B Profits $1.9 B Assets $30.5 B Market Value $22.3 B
# 456 Bharti Airtel
“Telecommunications Services” Sales $14 B Profits $0.8 B Assets $29.8 B Market Value $21.8 B
# 463 HDFC Bank
“Regional Banks” Sales $6.5 B Profits $1 B Assets $66.7 B Market Value $28.1 B

Appendix C
Belarus Bailout Hinges On Russia

22 April 2011
By Nikolaus von Twickel

<MOSCOW TIMES, emphasis added>

For the second time in two years, Belarus is facing bankruptcy. And for the first time, it seems that
Russia will be mainly alone in picking up the tab.

Belarus' currency reserves are running dangerously low, having slid from $6 billion to $3.7 billion over
the past six months, according to the web site of the country's central bank.

The situation is reminiscent of summer 2009, when a $2 billion loan from Russia and a $3.5 billion credit
from the International Monetary Fund helped Belarus survive the financial crisis.

But this time the political situation is much more volatile.

On Tuesday, the central bank announced that it would allow the Belarussian ruble to float freely,
heightening fears of devaluation and public unrest as people line up outside currency exchange booths.

President Alexander Lukashenko, the country's authoritarian leader, has few alternatives to turning
eastward for assistance.

A tentative rapprochement with the West was shattered after the presidential election last December,
when police brutally cracked down on the opposition, which complained that the vote, re-electing
Lukashenko to a fourth term, was rigged.

In response, the European Union has frozen assets and restricted visas for the Belarussian leadership.

"The EU is frustrated with Lukashenko, [though] they held out an olive branch before the election," said
Fraser Cameron, director of the EU-Russia Center, a Brussels-based think tank. The poll "turned out
to be a complete fraud," he added.

The situation is likely to deteriorate further after Lukashenko implicitly accused the West of being
behind a mystery bombing that hit the Minsk metro on April 11, killing 13 and wounding more than 200.

In his state-of-the-nation address to parliament Thursday, Lukashenko suggested that the sanctions
and bombing were part of a foreign plot against Belarus. "These are all links of one chain," he said,
Interfax reported.

The president added that the blast was possible because the government had allowed too much
"unnecessary" democracy. "We had so much democracy that you and I got sick," he was quoted as

And while the 27-member European bloc is currently hit by its own financial worries — having to avert
a credit crunch in Greece, Ireland and Portugal — Russia, by contrast, is awash with cash as rising oil
prices promise more than $51 billion in extra budget revenues this year.

Finance Minister Alexei Kudrin said earlier this week that Moscow would finalize talks with Minsk within
a month on terms for a $2.7 billion loan, of which $1.7 billion would be released from the Russian-led
$10 billion anti-crisis Eurasian Cooperation Fund.

The prospect of the Kremlin bailing out Lukashenko with another billion-dollar loan spurned concerns
that Belarus is sliding into even deeper dependence.

"Financially, Belarus is becoming another South Ossetia," said Alexei Malashenko, an analyst with
the Carnegie Moscow Center, referring to the breakaway Georgian region that is largely bankrolled
from Moscow.

Malashenko said the money was largely wasted on Belarus' Soviet-style economy.

Analysts have said the present financial woes stem in large part from a state spending spree in the run-
up to the December presidential election.

But two influential pro-Kremlin State Duma deputies said it was right to support the country's western

"After all, we are not helping Lukashenko personally, but the people of Belarus," said Konstantin Zatulin,
a member of United Russia and long-standing expert on policy toward former Soviet states.

He added that Russia was morally and politically obliged to help, just as the EU was bailing out Portugal
and Greece. "After all, we have political and economic integration with Minsk," he said.

However, Zatulin admitted that the Belarussian leader had been a difficult partner in the past.

Last year, Lukashenko angered the Kremlin by courting the EU and boycotting institutions like
the Russia-led Collective Security Treaty Organization.

In return, he was mocked by state-controlled NTV television and President Dmitry Medvedev, who
openly accused him of sowing hostility between Moscow and Minsk.

"I cannot say that I like him very much, but show me one other [Belarussian] politician with whom you
can deal responsibly," Zatulin said in a reference to the split Belarussian opposition, which failed
to settle on a single candidate to run against Lukashenko in December and put forth a whopping nine

Sergei Markov, another United Russia lawmaker and political pundit, went one step further by saying
Lukashenko's "demonization" in the Western press was unfounded.

"Maybe he is no stable ally, but he is a strong politician who has impressively survived the past 17
years," he told The Moscow Times.

Carnegie Moscow Center's Malashenko was also pessimistic about replacing Lukashenko. "Maybe they
do not like him, but they also fear to lose him," he said about the Russian government's support for the
incumbent Belarussian leader.

He added that, while the Belarussian opposition was too weak and divided, the economic aid should
at least be tied to political conditions to gradually facilitate change. "Sooner or later Lukashenko will
fall," he said.

Finance Minister Kudrin said earlier that the Russian loan would be issued on terms similar to those
of IMF programs.

Sergei Musiyenko, a Minsk-based analyst who works as an adviser to Lukashenko, said the Belarussian
government would meet all requirements for economic reform.

"We have been reforming for three years and we are known to be a sound borrower," he said
by telephone, adding that Belarus was a net donor to the budget during the Soviet Union. "There is huge
potential in our economy," he said.

Musiyenko pointed out that there were other potential creditors. As an example, he named China,
which has promised long-term aid worth some $16 billion.

Analysts have speculated that China could buy a stake in potash miner Belaruskali. They have said that
selling 25 percent of the firm could raise up to $7 billion.

Duma deputy Markov also said Lukashenko should also hope for help from Iran and Venezuela, which
have both established close ties with Belarus in the past years.

Appendix D

The following list shows the world's largest banks based on market capitalization, as of August 23, 2011. China currently
has Three of the Four largest banks in the world. In 2005, China did not have a single bank among the world's top 50.
Now it has four of the top ten.
Rank Bank Country Market cap ($b, 8/2011)
1 Industrial & Commercial Bank of China (ICBC) China 223.4
2 China Construction Bank China 167.1
3 HSBC Holdings UK 150.06
4 Agricultural Bank of China China 134.91
5 JPMorgan Chase & Co. US 130.27
6 Bank of China China 122.16
7 Wells Fargo US 120.86
8 Citigroup US 76.04
9 Commonwealth Bank of Australia Australia 75.24
10 Banco Santander Spain 74.81
11 Itau Unibanco Brazil 70.44
12 Royal Bank Canada Canada 70.38
13 Bank of America US 65.23
14 Mitsubishi UFJ Financial Japan 63.92
15 Toronto-Dominion Bank Canada 63.50
16 Westpac Banking Australia 61.69
17 Sberbank of Russia Russia 61.12
18 Bradesco Brazil 57.76
19 BNP Paribas France 57.06
20 Bank of Nova Scotia Canada 53.85
21 ANZ Banking Australia 52.76
22 Standard Chartered UK 52.16
23 UBS Switzerland 51.39
24 National Australia Bank Australia 50.83
25 Banco do Brasil Brazil 44.85
26 Bank of Communications China 43.91
27 BBVA Spain 41.84
28 Sumitomo Mitsui Financial Japan 40.20
29 China Merchants Bank China 39.64
30 US Bancorp US 39.01
31 Bank of Montreal Canada 36.92
32 Deutsche Bank Germany 36.07
33 Santander Brasil Brazil 34.77
34 Nordea Bank Sweden 34.29
35 Lloyds Banking Group UK 31.92

Appendix E
Top Banks in the World 2012

The following is a list of the top 10 banks and top 50 banks in world ranked by total assets. Deutsche Bank (DB)
is currently the largest bank in the world with assets of EUR2.186 trillion (US$2.810 trillion). In 2012, DB was
awarded the title of Best Global Investment Bank by Euromoney magazine and won six awards from Global
Finance including Best Corporate Bank, Best Foreign Exchange Bank and Best Credit Derivatives Provider,
Europe. Mitsubishi UFJ Financial Group (MUFG) is the second largest financial institution in the world with
assets of ¥218.641 trillion (US$2.803 trillion). The Bank of Tokyo-Mitsubishi UFJ is the main banking arm of
MUFG. Industrial and Commercial Bank of China (ICBC) is the third largest bank in the world. ICBC moved up
to third place in the new world rankings in September 2012. In December 2011, ICBC occupied only the sixth
position. The ten largest banks hold over $25.6 trillion in combined assets.
Rank Bank Country Total Assets, US$b * Balance Sheet
1 Deutsche Bank Germany 2,809.89 30/09/2012
2 Mitsubishi UFJ Financial Group Japan 2,803.42 30/09/2012
3 Industrial & Commercial Bank of China China 2,763.59 30/09/2012
4 HSBC Holdings UK 2,721.06 30/09/2012
5 Barclays PLC UK 2,584.30 30/09/2012
6 BNP Paribas France 2,562.99 30/09/2012
7 Japan Post Bank Japan 2,513.21 30/09/2012
8 JPMorgan Chase & Co. USA 2,321.28 30/09/2012
9 Credit Agricole SA France 2,317.12 30/06/2012
10 Royal Bank of Scotland Group UK 2,225.14 30/09/2012
11 Bank of America USA 2,168.02 30/09/2012
12 Mizuho Financial Group Japan 2,123.32 30/09/2012
13 China Construction Bank Corporation China 2,115.35 30/09/2012
14 Agricultural Bank of China China 2,078.03 30/09/2012
15 Bank of China China 2,027.41 30/09/2012
16 Citigroup Inc USA 1,931.35 30/09/2012
17 Sumitomo Mitsui Financial Group Japan 1,788.23 30/09/2012
18 Banco Santander Spain 1,672.11 30/09/2012
19 Societe Generale France 1,647.51 30/09/2012
20 ING Group Netherlands 1,604.57 30/09/2012
21 Groupe BPCE France 1,531.08 30/09/2012
22 Lloyds Banking Group UK 1,529.12 30/09/2012
23 UBS Switzerland 1,456.45 30/09/2012
24 Wells Fargo USA 1,374.72 30/09/2012
25 UniCredit S.p.A. Italy 1,245.95 30/09/2012
26 Credit Suisse Group Switzerland 1,088.60 30/09/2012
27 China Development Bank China 994.685 31/12/2011
28 Rabobank Group Netherlands 991.075 30/06/2012
29 Norinchukin Bank Japan 949.667 30/09/2012
30 Goldman Sachs USA 949.475 30/09/2012
31 Nordea Bank Sweden 914.056 30/09/2012
32 Commerzbank Germany 868.510 30/09/2012
33 Intesa Sanpaolo Italy 859.643 30/09/2012
34 Royal Bank of Canada Canada 838.216 31/07/2012
35 BBVA (Banco Bilbao Vizcaya Argentaria)Spain 829.794 30/09/2012
36 Bank of Communications China 823.033 30/09/2012
37 Toronto-Dominion Bank Canada 819.802 31/07/2012
38 National Australia Bank Australia 791.899 30/09/2012
39 Morgan Stanley USA 764.985 30/09/2012
40 Commonwealth Bank of Australia Australia 745.345 30/06/2012
41 Natixis France 721.933 30/06/2012
42 Westpac Banking Corporation Australia 700.447 30/09/2012
43 Bank of Nova Scotia (Scotiabank) Canada 681.203 31/07/2012
44 Australia and New Zealand Banking Group Australia 666.370 30/09/2012
45 KfW Bankengruppe Germany 665.818 30/09/2012
46 Standard Chartered UK 624.431 30/06/2012
47 Danske Bank Group Denmark 620.710 30/09/2012
48 Bank of Montreal (BMO) Canada 551.340 31/07/2012
49 Banco do Brasil S.A. Brazil 544.631 30/09/2012
50 Dexia Belgium 528.595 30/06/2012
51 DZ Bank Germany 523.025 30/06/2012
52 Banque Federative du Credit Mutuel (BFCM Group) France 494.723 30/06/2012
53 Landesbank Baden-Wurttemberg (LBBW) Germany 474.134 30/09/2012
* The exchange rate on September 30, 2012
Last Modified: December 7, 2012

Appendix F
June 8, 2011, 5:14 am Private Equity <emphasis added>

New Fund, With Ties to Kremlin, Seeks Foreign Investors

4:52 p.m. | Updated
As part of its drive to show foreign investors that Russia is a safe and profitable place to put their
money, a government-owned bank has established a private equity fund with a former Goldman
Sachs banker in charge and Prime Minister Vladimir V. Putin as its promoter.
Last month, Mr. Putin met in Moscow with prominent international investors including Stephen A.
Schwarzman, chief executive of the Blackstone Group, and Lou Jiwei, chief executive of the China
Investment Corporation, to try to generate interest in Russia’s direct investment fund. President Dmitri
A. Medvedev plans to announce the fund formally later this month at the St. Petersburg International
Economic Forum.
Over dinner on Wednesday in Vienna with a small group of business people and investors, Kirill
Dmitriev, an alumnus of Goldman Sachs and McKinsey & Company who is chief executive of the fund,
gave details of how it would be structured.
The point of the fund, Mr. Dmitriev emphasized, will be to make money. That is not always obvious in
Russia, where foreign investors have been concerned about corruption, lack of an impartial court system
and the authoritarian tendencies of the government.
“We want to make some returns,” said Mr. Dmitriev, who graduated from Stanford University and the
Harvard Business School. Before Mr. Putin named him to run the fund, Mr. Dmitriev was president of
Icon Private Equity, a fund focused on Russia and the former Soviet Union.
Profitability, rather than government policy goals, will drive the investments, Mr. Dmitriev promised.
While the overall aim is to promote growth and create jobs, investments will be judged according to the
potential return over the typical private equity cycle of five to seven years, he said.
Russia plans to commit $10 billion to the fund, in installments of $2 billion a year for five years, via the
government development bank Vnesheconombank. But the bank’s stake in investments will never
exceed 50 percent, meaning that foreign investors will retain control, said Petr Fradkov, deputy
chairman of the bank.
At the same time, Mr. Putin’s personal involvement in the fund is intended to reassure investors that
they will not be abused by arbitrary or corrupt lower-ranking officials. “The investor has implicit
comfort,” Mr. Fradkov said.
Mr. Putin met for an hour and a half on May 18 with the foreign investors, a group of about 20 people
that also included representatives of the Kuwait Investment Authority, the Abu Dhabi Investment
Authority and private equity fund Permira, Mr. Fradkov and Mr. Dmitriev said.
Investors are not being asked to write blank checks to the fund, but rather to invest in individual deals,
another effort to reassure them that they will have control over how their money is spent. Mr. Fradkov
said that there were projects in the works and that the first deals should be announced within nine

Mr. Fradkov would not give specifics about potential deals, but Mr. Dmitriev said one goal of the fund
would be to invest in companies that could profit from Russia’s rapidly growing middle class.
Investors may still need to be convinced. The questions put to Mr. Dmitriev and Mr. Fradkov at the
dinner made it clear that many still regarded Russia as risky and unpredictable. When politicians are
involved — and not just in Russia — there is always a risk that money will be steered to pet projects.
As Mr. Dmitriev points out, the best way to deal with such concerns will be to generate some big returns
in the years to come.

Appendix G
Moscow Tries to Reinvent Itself as Financial Hub
By ANDREW E. KRAMER <New York Times, emphasis added>
Published: April 3, 2013

MOSCOW — Having tried and failed to become a major financial center, Moscow is trying yet again —
only this time it finds itself competing for business with Warsaw, not London, Tokyo and New York.

Moscow wants companies to list on the Moscow stock exchange. It wants money center banks to
expand here, as well as insurance companies and law firms that deal with securities, to make Moscow
the hub for the former Soviet Union or Eastern Europe.

To do all that, city leaders are inviting business to glittering new skyscrapers, including the Mercury City
Tower, which at 75 stories is the tallest building in Europe.

“The idea is to upgrade the position of Moscow in ratings, to become closer to the leaders of innovation
and to the big boys of international financial centers,” Andrei V. Sharonov, the deputy mayor for
economic affairs, who led a roadshow tour promoting the city in Asia, said in an interview.

This spring, the city government sent deputy mayors to Tokyo, Singapore, Frankfurt, London, Boston and
New York to tell banks and other financial companies they should take a closer look at Moscow. The trip
was the first concerted effort by the city government to woo investors as tenants for the new high-rise
financial district called Moscow City.

Certainly Moscow has a lot of wooing to do. A city of traffic-clogged highways and sprawling concrete
apartment blocks, Moscow is widely known as a singularly difficult place to do business. It did attract the
big banking houses from New York and London after the fall of Communism. But cronyism, the lack of
transparency and shady accounting gave companies pause. Weak courts and selective enforcement
encouraged companies to conduct business outside Russia.

Political change in Russia further sapped enthusiasm. Vladimir V. Putin, a skeptic regarding greater
integration with the West, succeeded Dmitri A. Medvedev, who was seen as a modernizing figure, as
president in a switch known as “the castling” for its resemblance to the chess move.

Mr. Medvedev had named senior Western bank executives to an advisory council for transforming
Moscow’s financial sector. They included Jamie Dimon, the chief executive of JPMorgan Chase; Vikram S.

Pandit, the former chief executive of Citigroup; and Lloyd C. Blankfein, the chief executive of Goldman

But the Global Financial Center Index, published in March by Z/Yen, a consulting agency, placed
Moscow 65th out of 79 cities studied. London was first, followed by New York and Hong Kong. The
ranking placed Moscow between Bahrain and Mumbai. A survey by the World Bank and the
International Finance Corporation even ranked Moscow No. 30 out of 30 Russian cities for ease of doing

“Moscow was never going to be an international financial center,” a Western banker working here, who
was not authorized to speak for his employer on the matter, said of the effort. “That was a joke.”

So Moscow is setting its sights a little lower. Its biggest problem is to be taken seriously even as a
regional center.

The midsize companies in neighboring Ukraine or other former Soviet republics are choosing to go
public in Warsaw. They are hardly bothering to look at the carefully laid out welcome mat in Russia.
Kernel, a Ukrainian corporate farming enterprise, and Coal Energy, a Ukrainian producer of steam coal,
listed in Poland, where a policy of investing pensions in the stock market helps the local exchange.

The Warsaw stock exchange, in fact, has so many Ukrainian company listings it has a Ukraine index.
Micex, the Russian stock exchange, has no such index because it has so few listings.

Moscow must compete, said Mr. Sharonov, the deputy mayor, because “there are a lot of other
opportunities and competitors all over the world.”

Moscow’s roadshow was intended to illustrate the city’s efforts to become more livable for foreign
executives and residents, Mr. Sharonov said. A new interchange links the financial district to nearby
roads, for example, easing congestion.

Also, under the federal program to promote banking here, Russian financial regulators tied up loose
ends in ways that pleased stock traders and other financial professionals, but have not been widely

Russia created a central securities depository, introduced standard accounting rules for publicly listed
companies and is well on the way to consolidating nearly all financial regulatory authority in the central
bank by 2015. And, without much fanfare, the government now insists that all listed Russian companies
report financial results in accordance with international accounting standards.

“It’s a substantive change,” said Bruce Bower, the managing director of Verno Capital, a hedge fund that
focuses on Russia. “The government realized that by doing a little work, for the first time, it could make
a difference.”

A version of this article appeared in print on April 4, 2013, on page B3 of the New York edition with the
headline: Moscow Tries to Reinvent Itself as Financial Hub.