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Forbes: Foreign Business Is Lining Up to Get Back Into Russia

Neither politics nor sanctions have abated investors' appetite for the Russian market

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“European investors are waiting for the day, hopefully sometime in July, when Brussels axes sanctions on Russia,” states Forbes.
 

Prosperity Capital Management, a leading Russia and Former Soviet Union focused asset manager, which has in control assets of around $2 billion on behalf of an institutional investor base spoke to the magazine about the potential effects of removing Russia from what is percieved by the West as its "economic isolation".

“I don’t think lifting sanctions changes things in the short term for the Russian economy, but for investor sentiment it will be absolutely massive,” said Martin Charmoy, the company’s managing director.

He explained that there are funds eager to invest in Russia, especially while Russian stock prices remain cheap. For example, the Market Vectors Russia (RSX) exchange traded fund trades at seven times earnings, the cheapest out of the big four emerging economies.

However, he added, they are not able to invest as long as there are sanctions in place, as they will themselves be sanctioned for making their investment.

The fears arise from the recent case with BNP Paribas, a French multinational bank, which was put on probation for five years by a US judge in April in connection with an $8.9 billion settlement resolving claims that it violated sanctions against Sudan, Cuba and Iran.

A US court in Manhattan ordered the French bank to forfeit $8.83 billion and pay $140 million in fines for violating sanctions.

No one wants to be put in BNP's situation, but “when the iron curtain of Western sanctions is lifted”, and when “that risk no longer exists, Russia investors will be rewarded,” says Charmoy.

A similar sentiment is echoed by French newspaper La Tribune, which says that the dropping of the trade sanctions against Russia will be “a breath of fresh air for French farmers.”

“There are only a few more months to wait for breeders. While demonstrations of disgruntled farmers are only increasing in Brittany (northwestern France), the lifting of the Russian ban on French food products could give them a new life.”

There were other signs of the nearing lifting of the anti-Russian sanctions.

“There have been clear signs of a ‘pacification’ process recently,” Simon Quijano-Evans, chief emerging markets strategist at Commerzbank AG, recently told Bloomberg. “It does look as though all sides are starting to push more markedly for resolutions to the current geopolitical mess.”

French Minister of the Economy, Finance and Industry Emmanuel Macron, earlier told his country’s businessmen in Moscow that France would like to see sanctions lifted by the summer.

Another good sign is the reinstatement of the Russian-French Economic, Financial, Industrial and Trade Council (CEFIC), which was held this Monday and is the first session held since September 2013.

“Relations between France and Russia are alive and have increased compared to the years that preceded the economic difficulties and continue to this day. The progress is ongoing in the fields of aviation, space and energy," Macron said at the meeting.

Meanwhile, livestock farmers have been protesting against a slump in pork and milk prices, and poultry farmers are facing a freeze in output due to the spread of bird flu.

They have been blocking roads in several parts of Brittany with trailers, tractors and piles of mud for over a week in protest against low prices.

After a slight rebound to 1.40 euros ($1.52) per kg, considered by producers to be the minimum price to cover production costs, the price of Breton pork fell to 1.09 euros per kg on Thursday, the latest available price.

The local branch of France's largest union, FNSEA, and the young farmers' union said 20 percent of pig farmers were close to bankruptcy and another 20 percent facing enormous problems.

 


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