Russia pursues improvement of investment climate, leaves its power industry closed

President Putin tried to do his best to attract foreign investors during the opening of the Hannover trade fair

Russia's participation in the Hannover trade fair, which Vladimir Putin and Gerhard Schroeder opened yesterday, became a practical proof of Russia's aspiration to take the national economy to the level of the innovative development. This year, Russia acts as a partner of the fair, which is considered one of the most important world shows of up-to-date industrial technologies.

Organizers of the trade fair said that Russia appears to be a different state at the moment in comparison with its previous role, when it was known for its oil and gas deliveries. Russia is represented in Hannover with stands of the Russian aircraft, car makers (Sukhoi, Irkut planes and KAMaz trucks) and the defense export enterprise – Rosoboronexport.

Vladimir Putin apparently believed that the stands of the Russian companies in Hannover were not enough. Putin's speech at the opening of the trade fair was filled with phrases, which every investor wanted to hear, especially German investors. Putin stated that the results of privatization would not be revised in Russia. The president also said that the state was ready to approve the privatization of 3,500 joint stock companies and 8,000 state enterprises. Furthermore, Russia is going to become a WTO member on the base of standard terms and start negotiations about its membership in the Organization for Economic Cooperation and Development (OECD). Russia will continue restructuring natural monopolies and the banking sector. Russia will be ready to completely liberalize its currency by 2007. Russia and Germany will discuss the issue of German companies' participation in projecting and building a gas pipeline in Europe's north and develop perspective gas deposits in Russia. Finally, Putin confirmed Russia's readiness to pay its debt to members of the Pars Club of creditors, including Germany.

The impressive economic growth that Russia has accomplished over the recent six years and the ongoing economic reforms create a very good basis for further improvement of investment conditions in Russia. Organizers of the Hannover trade fair believe that those, who prefer not to deal with considerable investments in Russia, make a huge mistake.

The talks about Russia's prescheduled debt payments to members of the Paris Club of creditors were started after Germany sold the bonds of Russian debts to private investors. That was quite an unfriendly action for Germany to take. The talks between the Russian and German finance ministries are drawing to their positive end, although it took too much time and energy for them to last.

The position of the Russian government regarding the plans of the German concern Siemens to purchase 70 percent of shares of the Russian motor-making enterprise Power Machines does not add any stability to bilateral relations (Power Machines is the Russia's leading manufacturer and supplier of equipment for hydro, steam, gas and nuclear power plants, equipment for transmission and distribution of electric power, transport and railway equipment). The Russian administration originally supported the deal, although it had to face very big problems afterwards: Power Machines have a considerable defense segment.

The document on the cooperation between Russian giant Gazprom and the German concern E.ON is another problematic issue between the two countries. Spokespeople for the German company believe that explicit conditions of cooperation become rather vague because of new Russian ideas. It goes about the possible delivery of natural gas to China, Korea, Japan and the USA. German specialists believe that Russia does not welcome independent foreign capital when it comes to the energetic industry. Russia's wish to control the industry thoroughly will eventually result in the reduction of the foreign capital in such projects.

Russia is far from being paradise for foreign investors. Is paradise situated in China or Brazil, for example?