Andrei Borodin has a column in the MT today which uses the current debate around credit ratings to take a swipe at Russia’s poor corporate justice record. Vladimir Putin recently dismissed ratings as ‘superficial’ and too vague to be of any use, but acknowledged their power by linking the resignation of Standard & Poor’s chief executive in early August to a downgrade of the U.S.’s sovereign credit rating. This latest criticism is a watered-down version of his more blustery July assertion that ratings are an ‘outrage’, made in the wake of Russia’s downgrading which, he said, drove up costs and ‘increased risks’.
But, says Borodin, Russia doesn’t need any help from ratings agencies when it comes to creating risk – and he should know. Since March, Borodin has been in self-imposed exile from Russia, where he is wanted by authorities over a $415 million loan made by Bank of Moscow during his time in charge. He claims that his forced exit from the company, just after VTB bought the government’s stake in the bank, was ‘political’. Since then, from across the border, Borodin has sent a few shots over the eaves, including accusations that the bank’s gigantic $14 billion rescue package was a sham.
Borodin might seem biased, due to his personal experiences – indeed, he more or less admits this in the article – but then, his argument is anything but far-fetched, and his story serves as yet another reminder that, in Russia, the rules are never fixed:
While Putin bemoans the country’s credit rating as an outrage, it is the politicians and the flawed system that are largely causing the problems.
Judging by the reaction to the downgrade of the United States, international investors would probably pay little attention to an upgrading of Russia. What they would pay attention to would be a free and fair election of a leader who can institute international standards of corporate governance, transparency and freedom of speech.
Instituting an independent judiciary and rule of law could be the most powerful catalyst to revive faith in the credit worthiness of Russia as a haven for foreign investment.
You can read the piece here.