(translation from Kommersant h/t Kompromat.ru)

On the eve of Pres. Dmitri Medvedev's visit to Omsk, planned for the 12th of February, local authorities took down an ad billboard for United Russia picturing Prime Minister Vladimir Putin.  Now the ad features a photograph of Pres. Medvedev (see picture).  The billboard with the photograph of Putin appeared right after his election to as president.  After Medvedev became head of the government, his photograph appeared next to a photo of Putin.  Now the billboard only has a picture of a smiling Medvedev together with the slogan, "Omskites for a Strong United Russia."  Yesterday, United Russia officials announced that they did not know anything about the changes to the billboard.  "We did not discuss this issue at the Regional Office of UR.  Maybe the decision to update the posters was made by the General Council of the Party," said Viktor Artemyev of the regional party apparatus.  Meanwhile, members of the opposition tied the change in advertising to the arrival of the President in Omsk.  "Bureaucrats want to please, as they say,  to lick the high leadership," noted First Secretary of the Omsk Communist Party, Aleksandr Kravets.  The ad with the President's face is located on the road to state cottages, in which high-level guests to the region stay.        

This little beauty popped up on YouTube this weekend.  It's a hidden camera showing the ex-husband of Agrarian Minister Elena Skrynnik taking a bribe.  The video was used for his subsequent prosecution under Russia's new anti-corruption legislation.  Mr. Skrynnik, a former bureaucrat in Chelyabinsk, took approximately $53k in bribes according to prosecutors.  You can see him count some of this money in the video:

I wrote last month about how this year Russia needs to get serious about its desire to attract more foreign direct investment (FDI), and that the upcoming amendments to the Strategic Sectors Law would be an early test of that commitment.  Today brought various stories which brought this theme even more into relief.

First, statistics on foreign investment into Russia for 2009 were released.  Overall, the level of foreign investment into Russia fell to $41.4 billion according to UNCTAD, and to $54.7 billion according to GOSSTAT.  Using GOSSTAT's optimistic (wishful?) numbers, the amount of FDI coming into Russia during 2009 was at just under $10 billion.  Compare this to PM Putin's incredulous statement last December that FDI for 2009 would approach $35 billion. Furthermore, it represents a 50 percent drop from the amount of inward FDI for the same period (Jan.-Sept.) in 2008.

Meanwhile, Pres. Medvedev today again reiterated the Russian government's commitment to attracting foreign investment.  Trade Minister Nebiullina stated that investment currently accounts for 20 percent of Russian GDP and that their goal is to drive this number up to 30 percent.  And Russia has the most to gain from foreign investment, which is only 3.4 percent of GDP (FDI is a paltry 0.6 percent of GDP).  Finally, Medvedev noted at the same meeting that "Each investment project killed by bureaucracy equals lost revenue and jobs!"  Here is Medvedev at the meeting:



Update

Today, PM Putin chaired the first meeting of the Commission on Foreign Investment for 2010.  On the docket were eight applications submitted by investors from the Netherlands, Belgium, Singapore, Switzerland, and Cyprus.  You don't have to be an expert to know that all but one of those countries are notorious offshore havens for Russian capital (i.e., these transactions represent nothing more than previously-exported Russian capital returning to the country and should not be counted as FDI).  Interestingly, Putin claimed in his remarks at the meeting that the amount of FDI inflows into Russia during 2009 amounted to $40 billion.  Obviously, as discussed above, this is not true and is more likely the number for total foreign investment or perhaps the total accumulated FDI reserves in the country.  Here is Putin speaking to the Commission:



Here is a running list of the applications reviewed or passed over at the meeting:

• Merger of Media-1 (Ivan Tavrin) and "AF Media Holding" (Alisher Usmanov) - according to FAS Chief Igor Artemyev, one of the companies is registered offshore and thus the investment was considered "foreign."  The new company will reportedly be named "UTV Rasha Holding" (ЮТВ Раша Холдинг).
• Merger of VimpelCom and Kievstar - the two telecom giants - Telenor (Norway) and Alfa Group (Russia) agreed last October to integrate their holdings of these two companies into a unified enterprise, which will reportedly be named VimpelCom Ltd.  News reports state that Alfa Group will control 43.89 percent of the new company while Telenor will hold 35.42 percent. The remaining 20.69 percent will be listed on the NYSE.  VimpelCom Ltd. is registered in Bermuda, with offices in the Netherlands and will be lead by Aleksandr Izosimov.
• Basic Element Acquisition of Russneft Withdrawn - Artemyev stated, "We have finally figured the transaction related to Russneft."  Well, actually they didn't.  Deripaska withdrew his application after his application was passed over without a decision at four different meetings last year.  
• Merger of Turkcell and MegaFon NOT Reviewed - the proposed merger between Turkish telecom Turkcell and Russian telecom MegaFon (МегаФон) was not reviewed purportedly because its application materials were not properly completed.  Artemyev stated that if the two sides are ready, "the necessary materials can be prepared in a month."  Press reports noted that one of the main opponents to this merger - a genuine FDI deal btw - is Alisher Usmanov...yes, the same Usmanov whose AG Media Holding received approval to merge with Media-1 (discussed above).
• Merger of Altimo and TeliaSonera NOT Reviewed - this merger between Russian telecom Altimo (of Alfa Group) and Swedish TeliaSonera was put off due to "the need for further consideration of the deal by shareholders," according to Artemyev.  TeliaSonera is the chief rival of Telenor, which was involved in the merger with another Alfa Group company (discussed above).

Today, Federal Law No. 381-FZ of December 28, 2009, "On the Fundamental Principles of State Regulation of Trade in the Russian Federation" takes effect. I have not found a good English translation yet, so please let me know if one exists, but an English-language summary can be found here.  Remember that this was one of the major points of contention between siloviki and civiliki last year, with a notable victory for the latter.  Below is Russia Today's coverage of the new law:

According to the editor of Vedomosti (speaking over the phone from Davos), the interest in Russia at this year's conference is relatively low compared to last year.  I personally feel like the conference itself has not received the coverage in years past, perhaps because of the financial crisis.

As I wrote last week, the FAS and other government agencies are just finishing up their proposed amendments to the Strategic Sectors Law.  The text of the proposed amendments is still not available, but the FAS did summarize some of the changes in a press release today.  The changes listed by the FAS:

• If a foreign investor already owns shares in a company, and acquires additional shares through the issuance of new stock, no agreement will be needed so long as the proportional ownership of all the owners does not change.
  
• Increase to 30 days the time for agreements on the implementation by foreign investors of conditions established by the Governmental Commission.  
• The bill will also clarify the the rights of the authorized body (i.e., the FAS) to monitor foreign investment in strategic enterprises.

FAS Head Igor Artemyev said, "Before we transfer the amendments to the government, we will hold a series of discussions with both foreign and Russian investors.  It is important for us to hear their opinions and suggestions on the proposed changes to the law, and to remove any ambiguities in the understanding and application of the law's norms."

So what should foreign investors ask for in these discussions with the FAS?  A few ideas:

•  Definition of Control - the law's provisions on what constitutes "control" - and thus what subjects foreign investors to the law's requirements - are still vague.  I assume that the FAS has borrowed legal concepts on control from its work in the anti-monopoly area.  Still, it would be better to have a binding set of criteria by which foreign investors can accurately predict whether or not a given deal will be covered by the law.
• Publication of Inquiries - since the law's adoption, the FAS has received more inquiries about the law than it has actual applications.  The FAS should make this process transparent while protecting the identities of the investors submitting the inquiries.  They could model this on the U.S. Department of Justice's FCPA Opinion Procedure Release.
• Adopt a Flexible Standard for Different Industries - if Russia must include the media industry and fisheries on the list of strategic sectors, it should at least differentiate them from the defense and nuclear industries. 
  

I found this little graph over at gorod21's blog on ZheZhe.  It shows the interest in corruption issues based on searches for the most common terms - "corruption" (коррупция), "bribe" (взятка), and "kickback" (откат).  As you can see, the interest has increased remarkably over time, hitting a record high in late-October/early-November.




Пульс блогосферы по запросам коррупция, откат и взятка