Business in Russia
From bad to worse
Domestic and foreign firms wonder how serious things might get
BEFORE the current standoff between the Kremlin and the West over Ukraine, it was already clear that Russia's economic model, of strong energy exports fuelling domestic consumption, was running out of steam. In 2007, on the eve of the global financial crisis, Russia's economy grew by 8.5%. Last year growth was a meagre 1.3%.
Still, the country's population of 144m, its entry into the World Trade Organisation, its consumers' aspiration to a Western lifestyle and its status as the “R” in the BRICs have persuaded multinationals to keep investing in plants in Russia, and foreign investors to keep providing capital to Russian firms. The attitude until recently, says Alexis Rodzianko of the American Chamber of Commerce in Moscow, was that “Russia's economy may be slowing, but my own prospects are pretty good.”
Now the outlook for businesses there is looking gloomier. With pro-Russian separatists seizing government buildings in eastern Ukraine, amid talk of a full-scale invasion, firms of all kinds fear a tightening of American-led sanctions, a cut-off of foreign lending and investment, and a further fall in consumers' confidence.
The most immediate concern, especially for Western firms doing business in and with Russia, is the curbs the United States and the European Union have imposed on dealings with certain individuals. Even the somewhat stronger American sanctions imposed so far are, on paper, “pretty limited”, says Alexander Kliment of Eurasia Group, a risk-analysis firm. But they have created a “scare factor” that is magnifying their effect. For example, shares in Novatek, a gas producer, fell sharply when the restrictions were announced, on fears it might struggle to do deals with foreign partners or raise capital abroad because Gennady Timchenko, a friend of Vladimir Putin's named on the American sanctions list, owns 23% of the company and sits on its board. If Igor Sechin, the boss of Rosneft, another energy firm, is sanctioned, the effect may be similar.
美国和欧盟已经对与俄罗斯特定人物的交易实施了限制，这是驻俄的和与俄有业务往来的西方公司所要面对的最迫切的难题。风险评估公司欧亚集团（Eurasia Group）的风险评估员克利门特（Alexander Kliment）称，仅从字面上看，尽管是相对更严厉的美国方面的制裁作用似乎“十分有限”，但是它们已经催生出了一些“恐惧因素”，从而放大了其效力。比方说，普京的朋友，拥有天然气生产商诺瓦泰克公司（Novatek）23%股份的季姆琴科（Gennady Timchenko）被列入了美国的制裁名单；制裁令甫一发出，Novatek的股价便急剧下降，因为人们担心制裁会成为其进行国际贸易与融资的绊脚石。如果另一家的能源企业俄罗斯石油公司（Rosneft）的老板也被制裁，其公司的股价也会有下降之虞。
Foreign firms fret that sanctions could also create openings for competitors. American firms worry that the EU's softer curbs may give its companies more flexibility. The boss of Siemens, a German engineering giant, met Mr Putin in Moscow last month. Americans and Europeans alike worry about losing out to Asian rivals. Moscow business circles are full of rumours of Chinese executives trying to peel off contracts by urging Russian companies not to depend on Western ones, given the possibility of further trading restrictions.
Russian firms and politicians, in turn, are casting around Asia and elsewhere for new customers to replace those they fear losing from the West. Russia's deputy prime minister, Arkady Dvorkovich, said this week that the government hoped to finalise soon a long-promised deal for Gazprom to sell gas to China. Rosneft is seeking to treble its exports of oil to China. Sukhoi, a state-owned aircraft-maker, has just struck a deal to sell a fleet of small passenger jets to a Chinese airline, hoping this will offset any loss of orders from Western carriers. But its plane, the Superjet, is chock full of key parts from American and European suppliers, and thus its production is vulnerable to any tightening of sanctions.
For domestic firms, a bigger worry than the sanctions imposed so far is the risk of losing access to foreign loans, and what that will mean for investment, productivity and growth, says Elena Anankina of Standard & Poor's, a ratings agency. Western lenders are likely to honour existing loan deals. But they may be reluctant to provide fresh financing. Rusal, an indebted aluminium producer, is among the Russian firms most exposed to this. Some state banks, such as Sberbank and VTB, have indicated they are ready to fill the gap left by Western lenders. But Ms Anankina wonders how long they will be able to do so. Indeed, some Russian banks themselves depend on Western loans. With capital flight hitting 60-70 billion in the first quarter of this year alone, investment in domestic production—what the spluttering economy needs most of all—will be even harder to come by.
标准普尔（Standard & Poor's）分析师Elena Anankina称，对于俄罗斯的本土企业，比起目前的这些禁令，更令它们是未来失去国外融资渠道的风险。西方的贷方可能会完成目前的贷款协议，但是不会愿意提供新一轮的贷款。在俄罗斯众多可能受此问题影响公司中，负债累累的俄罗斯铝业公司（Rusal）可谓首当其冲。俄罗斯的一些国家银行——如Sberbank和VTB——表示，它们已经准备好去填补西方贷款机构离去后留下的空白。但是Anankina怀疑这些银行不能坚持很长时间。事实上，一些俄罗斯银行自身还需要依靠外国资本。仅本年第一季度，俄罗斯的资本流出量就高达6-7千万美元；现在俄罗斯的经济处于困难时期，国内的生产比以往任何时候都急需投资，这一变故将使该需求更难得到满足。
The fallout from Russia's annexation of Crimea and further stoking of unrest in eastern Ukraine has put downward pressure on an already weakening rouble. On its face, a cheaper currency should be a boon to domestic producers. Visiting Moscow this month, Carlos Ghosn, the boss of Renault-Nissan, a global carmaker which is buying control of AvtoVAZ, the maker of Lada cars, argued that the weak currency will be “an advantage for local brands”.
But thinking that a “weak rouble is the way forward” is the “wrong paradigm,” argues Yaroslav Lissovolik of Deutsche Bank. Many Russian manufacturers, like Sukhoi, depend on imports for inputs and equipment. And in any case, many are running near full capacity and will be unable to grab market share from foreign rivals without money to invest in increasing output.
This confluence of economic bad news will hit a few industries first and hardest: consumer goods, construction, property and banking. Demand for the roughly half of Russian steel that goes to building projects at home will drop. Car sales, dependent on the availability of bank loans, will probably fall. Already a softening market has led Ford to consider cutting production at its joint venture with Sollers, a Russian firm. Even a continuation of the current stand-off between the Kremlin and the West would be bad enough for business. But things may well get far worse.
1.run out of 用完；耗尽
Should they run out of battery charge half-way to their destination, what will they do?
It will run out of money this year without fresh cash, and markets are charging punitive rates for borrowing.
2.financial crisis 财务危机
The financial crisis put an abrupt end to that expansion.
Will china have a financial crisis?
3.deal with 与…交易；应付；对待
Talkback: what helps you deal with career anxiety?
I'd be interested to hear how other bosses deal with this.
4.worry about 担忧，烦恼
I worry about these five qualities.
They have their own challenges and lives to worry about.