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Investors: Think About Commodities

It’s not a new idea in any sense, but it continues to hold a lot of weight whilst the Kremlin refuses to acknowledge that their current economic ‘policies’ are little more than shopping lists attached to petrodollars.  The resounding cry is that Russia’s next economic model has got to be based on investment.  Former Finance Minister Alexei Kudrin is spreading the word in a manifesto-style piece about the Russian government’s current budget outlook: compared with 2008, when the books were balanced with oil at $57.5 per barrel, the budget for next year will run a deficit unless oil stays above $117 – and with predictions currently at around $100, that seems unlikely to happen.

Can Putin actually move on?  Troika’s strategist Chris Weafer talks to Bloomberg today about whether or not Putin’s government needs to make some changes. Putin ‘understands that Russia needs to improve’ – but as Weafer points out, across the board, the message from big companies like BP (who said that its investments in Russia are the best they’ve ever made, despite having variously got burned) Siemens (who have promised a $1 billion investment program) and China’s latest promise of $1 billion to a joint investment fund with Russia is, broadly: ‘don’t be afraid of investing in Russia, just be aware of the risks and do your homework’.  And inflation is ‘much more under control’ now – what investors really need to be aware of, Weafer says, is the potential slowing in global demand for commodities.

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