Monday, 31 March 2008

Official confirmation of the end of an era: Aeroflot and the Tupolev 134

This brokers note extract across the screens today:

Aeroflot sells Tupolev 134s
March 31, 2008

Event: On Friday (28 Mar) Aeroflot announced the sale of its Tupolev 134 regional jets. Tu-134 has been furrowing the skies for more than 40 years but on 31 Dec 2007 the company stopped operating this type of aircraft. Nine of these planes were sold to Aeroflot subsidiaries: Aeroflot-Don, Aeroflot-Nord and Aeroflot-Plus; the company plans to sell the remaining five to external buyers. The average age of these aircrafts is 28 years old and they are priced at approximately $3mn.

Ah well. No more bone-shattering ‘lift-offs’ from the Soviet workhorse of the skies for Aeroflot. Um…not quite…it’s two main regional subsidiaries will still be using the Tupi for some time to come.

They have to. While, ahead of State Duma elections in December, there was lots of celebration of the Sukhoi Superjet 100 RJ – the planned replacement for the Tupi and set to be the Russian competitor to the Embraer and even the Boeing 737; the reality is that it is not even ready for test-flight yet.

But the Tupi had its charm: as I recorded in the back end of this post. The real writing on the wall came, though, when the EU closed its airspace to Tupolev 134s last year.

I wonder why? (PS: everyone survived this ‘incident’):

Week in review: St Petersburg; Russia Today and Roman Abramovich

On Monday night I took, for the first time, the newish Grand Express train to St Petersburg. A first-class-only service, it underlines that, for the best in business class train travel, Russia is streets ahead of the rest of the world. It offers suites (with their own shower and bathroom) and even the more modest premium cabins (which I took) have their own washbasins, 50% larger than normal and very comfortable beds and satellite TV: and superb waiter-to-cabin service.

For St Pete’s I had packed the full furs, guessing the weather could be inclement. And, boy, was it? Perhaps the worse weather I have experienced in four years of living in Russia swiftly descended on Tuesday afternoon. Visiting a client located in Arsenalnaya I thought it might be a pleasant hour or so’s walk back to Winter Palace Square (close to where my hotel was located). So I am strolling along the Neva when suddenly this extraordinary wind sweeps down from the Gulf of Finland and – despite the knee-length black leather, fur-lined coat (with the luxuriant mink collar and matching mink hat) it feels like the talons of an Arabian falcon are slicing through my bones.

So I turn right and, fortuitously, am right by Finlyansky Station (the setting for so many Cold War tales, both fictional and very real). I negotiate a sensible taxi fare to Winter Palace Square and, as I arrive, so do the depths of mid-winter. The snow starts to fall horizontally

Having missed lunch – and knowing I had an evening at the opera – I took High Tea and watched the snow fall and fall: about 12cms in just 4 hours. And, indeed, as I left the opera later that night, the weather was staggeringly bad.

My guest for business lunch the next day – in response to “please suggest somewhere where they can cook” – took me to the newish Terrassa restaurant. It was quite superb and almost as good as the best elitny restaurants in Moscow. Lunch was, of course, ‘dry’, but had it not been, I think it would have been almost as expensive as Moscow too. I had taken half day’s leave and spent it in annual pilgrimage to the Hermitage. Having Russian residency meant I was allowed to buy a ticket for just 100 RUR, which was very pleasing.

Lots of the rooms are closed for restorations until spring (Mid-April), but I really go for the Renaissance and Baroque Italian collection; including some excellent Titians and a favourite Bronzino. The Palace does have, BTW, a superb collection of Van Dycks; including several bought after the English Royal Collection was broken up after our civil war, which ended up in the Romanov collections.

Blogging was mostly absent this week, as it was rather busier even than usual. Saturday morning a car from the station comes to take me to Russia Today, where they wanted me to do a studio interview on British investment in Russia. The entrance to Russia Today is located in the vast RIA Novosti complex (just by the dustbins actually, which I think is surely a political sideswipe at the state media TV outlet employing so many foreigners).

Actually, I was crap. No, really, I was. I have done, in various countries, over a hundred bits of telly and radio and this was my worst ever. I have since seen the tape and, while not a train wreck, as such, it is just too ragged a performance; my ‘punch points’ were off and in one sentence I seem to lose the ability to conjugate in my first language. It is not what Exile promises broadcasters: to give great headline. On the other hand, I keep my answers within a nicely sound-bitey 15 seconds each or so. But, most unforgiveably of all, I am dull.

Being driven home, I pondered having Driver drop me off for lunch in Kamergersky. Thank God I didn’t!! Before my interview I went into make-up and, as they do things with my hair (a gallon of lacquer) and stick on some slap, I am distracted by the producer’s briefing. And although you can’t see this on the tape – no I am not giving you the link! – when I later walk in my apartment, having been driven back, I catch myself in the mirror. I am ORANGE. Orange I tell you, with the hair swept en bouffant like a Soviet '80s crooner. I look like a paedophile from Paphos. If I had walked into Café Des Artistes like that I would never have heard the end of it!

Having scrubbed my face, I switched on a new opera CD I have (Anna Netrebko arias); pour a glass of Montrachet; kick off the Guccis and try, just try, to clear myself of a most unsettling feeling of ineptitude and ennui.

Back at the office on Monday, I shall, Stalin-like, issue a приказ to staff and have this TV appearance declared un-history; never to be referred to again…

Saturday evening, I took a dearly beloved friend to Nedal’nij Vostok; where the selection of crustacea on offer is prepared in some of the finest ways available in the world. While there, the vast room is suddenly overcome by a nearly static charge of excitement. A moment later and I see Roman Abramovich walk past my table. Two noteworthy things.

The first is he really does have the most startlingly clear blue eyes, lit like lamps; and I can see why women, caught in their ice-blue gaze, are entranced by him. Secondly, he was body-guard free. If you hang out in Moscow’s elitny restaurants, you will see plenty of household name billionaires, but I like the fact that Abramovich doesn’t ponce about with heavy personal security, inside. Outside, as I was later to discover, it is rather different. Abramovich doesn’t go for flash cars, but the huge Chrysler limo, flanked by four 4x4s was clearly his. The nest of antennae on them, each bulging with OMON, clearly gave it away. He is entitled to OMON protection, of course, as regional Governor of Chukotka.

Tonight, I expected to see Nabucco at the Bolshoi, but discovered at home I should have been there Saturday night. Not a great end to an otherwise diverting week.

Sunday, 30 March 2008

Red Exile’s week in Culture: operas at the Mariinsky and the Stanislavsky-Nemirovich-Danchenko

Tuesday 25th March: In St Petersburg this week, I went to see Turandot at the Mariinsky. Turandot is not the most revered of Puccini’s opera’s – perhaps in recent years because people are disappointed that Nessum Dorma – made so famous by Luciano Pavarotti – is indeed only three minutes long; and the ending of the opera is slightly odd.

Puccini died, of course, before the last two scenes were written and these were completed by Franco Alfano. At the opera’s première in 1926, in front of il Duce, the iconic conductor, Toscanini, stopped the orchestra at the point where Pucini’s autograph work ended, turned to the audience and said: “Here the opera finishes, because at this point the Maestro died.” And, it is true, the final plot resolution (where ice-princess Turandot’s heart melts and is united in love for Prince Calaf) is wildly improbable and unconvincing, even for opera.

The late, great Paverotti in his signature piece:

In truth, this was a so-so outing at the Mariinsky; although I must confess I have never yet seen a production of Turandot to rival Andrei Serban’s classic production, in repertoire at the Royal Opera House, Covent Garden, which I first saw 15 years ago and kind of defines Turandot for me (and how I caught the opera bug).

But, to the Mariinsky’s Turandot. Irina Gordei, as Princess Turandot, was sublime – and indeed convincingly forbidding in the first two acts. Yuri Marusin, as the lead tenor, Prince Calaf, was not having a good night. He fluffed his breathing in Nessun Dorma (it is, to be fair, a very, very difficult piece to sing) and faltered badly about a third of the way through and, for a while, his confidence fled him. Was he coming down with a cold I wondered? I don’t know him as a singer, but it seemed to me that he struggled through this performance and lacked power in his voice. His was a disappointing performance. He is also, to be blunt, just far too old for this part: more truck driver than dashing Tatar prince…

Some of the cameo roles, though, were performed very well: especially the comic parts of Ping, Pong and Pang (Andrei Spekhov, Alexander Timchemko – who was very good indeed – and Oleg Balashov). A notable shout-out too to Victor Vikhrov as Emperor Altoum: singing from a gantry up in the gods, his voice had timorous power and sweet reason.

I was delighted to catch up with the news, BTW, that the Mariinsky closure for restoration (which was scheduled for the end of this season), has been postponed until the end of 2009. Partly this is because the temporary home being built for the Mariinsky opera and ballet companies is behind schedule but mostly, I suspect, because the Russian authorities leaned on the Mariinsky not to close this grand old theatre before the Main Stage of the Bolshoi has re-opened (November 2009).

Thursday 27th March: Tosca at the Stanislavsky-Nemirovich-Danchenko. This is the first time I had seen this production and I was initially a little apprehensive; because Tosca calls out for a truly onctueuse presentation, whereas the S-N-D’s, love them though I do, tend to be more sparse and stripped down to visual minimums (although often strikingly so). Actually it was a success with a set design that was both minimalist but also evocative of Rome’s lavish opulence.

Tosca is another punishing role for a soprano and I thought Irina Arkadeva was only partly successful. For me her voice has too much coloratura for Puccini and now and then I thought her tendency to warble quite distracting (but this might have been to cover up some rather loose pronunciation of the Italian libretto). I have two wonderful recordings of this opera, with the Tosca role being performed, respectively by Callas and Angela Gheorghiu (the latter, Romanian diva I have yet to see perform live but her voice is extraordinary). So it is a really hard role for a younger soprano and, judging by the sour look on her face at the curtain call, I think Arkadeva realized that she hadn’t quite pulled it off that night.

But contrast, Mikhail Vekya, as the tenor lead, Cavaradossi, was just brilliant and his was a complete triumph of a performance – now if only he has sung Calaf in St Pete’s! – his performance was also so much more enjoyable because he was clearly having the time of his life. At the curtain call he was so Italian (and I mean that in a good way), I really had to check the program again to confirm he was Russian: he has a tremendous and infectious enthusiasm for his craft.

Also giving a superb performance was Aleksey Shishlaev as the con brio baddie, Baron Scarpia. His end of Act One - Tosca, nel tuo cuor s'annida Scarpia – while the chorus accompanies in a Te Deum was just riveting and bliss to experience. Overall I thought this a highly rewarding evening and a production I would recommend to anyone coming to Moscow and wanting, tentatively, to dip their virgin toe in the waters of opera.

While in St Pete's I went to a splendid classical music CD/DVD specialist I know; hard by the wonderful Astoria Hotel, where I stay. There I treated myself to some pieces that I have heard but don't own; including another piece by Estonian composer, Arvo Pärt, to whose work I am becomming addicted.

I also bought a DVD of Philip Glass's opera Satyagraha. Now almost 30 years old, this established Glass's reputation as enfant terrible of musique minimale. I have yet to carve out the right evening to listen to it. "Inspired by the life of Ghandi", it has no plot. And the libretto is in Sanskrit. It is not performed very often.

Monday, 17 March 2008

Red Exile at home: a photo-meme

From this last Sunday

(and, apologies in advance, I am a truly crappy photographer)

So I return from a week in London and before me are rows of sheeny-shiney shoes. Housekeeper had sent them to the boy at the Marriott Aurora for cleaning. I love clean shoes - scuffed shoes depress me: having them sent out for cleaning is an essential indulgence (especially as snow is forecast for Moscow later this week). The Arab photographs are part of a group I have had framed for the hallway:

While in London I splurged at Jo Malone's, inter alia, on scented candles. I brought back a bunch of 'wild fig and cassis'. The cushions, from a shop I like in Marrakesh, hide the hideous sofa (like all expats, this is a rented apartment)... into every life a little rain must fall...

The Jo Malone splurging included more bottles of Pomegrante Noir. There is no Jo Malone stockist in Russia - it is still a hard life out here LOL - so I buy whenever I am in London or fly British Airways... but the latter no longer stocks Pomegranate Noir, so I bought extra in her shop: sulk. Although I have... er... a fair stock, I always buy, because one never knows how long it will be between trips.

Housekeeper and I have a game. She constantly rearranges the bottles in different shapes, whereas I like to group them by scent (er... I 'collect' three). She goes for fancy shapes. It is our little game and, since I am never here when she is, is as close as we have gotten to human interaction since the day I hired her...

I also checked that the office courier had picked up my opera and ballet tickets for next few weeks. These are:
Tosca - 27th March
Nabucco - 29th March
Chaika (sixth time!) - 7th April
Romeo & Juliet (Dusseldorf ballet on tour) - 19th April - and I have just ordered tickets for their Stravinsky/Rites of Spring for 23rd April
Madam Butterfly - 27th April

I guess I am an opera and ballet nut (but this quarter has been a little disappointing in terms of offering, so I have gone less than usual):

On Saturday I also worshipped at the Nepresso store on Petrovka Pereulok - and finally succumbed to buying one of those cute capsule holders (who on earth buys those wildly over-priced trinkets I had, it seems). Currently on offer, Chez Exile, we have (left to right) the current 'limited edition' Goroka; the previous limited edition 'special club' (which I 'stock-piled' before it sold out); Arpeggio (for breakfast) and the one I buy for people who insist on adding cow-juice to real coffee...

On Saturday, I also bought a lamp stand: slightly Ottoman, slightly Victorian-English. That corner needed a lamp stand. It was ruinously expensive (at 31,000 RUR), but it appealed to me:

The lighting now works better and doesn't clash with the pair of landscapes I bought from Ukrainian painter, Anna Gidora, from her 'Black Sea' series. They are dedicated the the effect of the wind upon land and souls. She wrote a poem about them:
"Тень ветра почти незаметна,
Но очаровывает своим присутствием.
Ветер всегда наполнен смыслом.
Через тень он шлёт послания,Но как научиться их читать?"
"Shadow of the wind is almost imperceptible,But it charms by its presence.
Wind is always filled with sense.
Through a shadow it sends a message,
But how could we learn to read it?"
(getting into Russia, on the overnight train, required an export license from the Ukrainian Ministry of culture (Ukrainian customs); temporary import license into Russia and (signed and stamped, natch) documents for the eventual Russian export license)

Sunday evening I settled down with this really sweet US-Ukrainian film (starring Elijah Wood) and a bottle of the Marchesi Antinori's finest not-quite-plonk (of which I bought a case from Moscow's Globus Gourmet):

Quiet weekends in the world's busiest city are a treasure...

Thursday, 13 March 2008

Final Day (III) of the Ukrainian Investment Summit, London. Taking stock

Wednesday was the third and final day of the Ukrainian investment summit in London: and Adam Smith Conferences did an excellent job overall. This was the most interesting conference I had attended in years.

The session I will highlight today - and the topic, really, on everyone lips for the last three days: Spotlight on the growth in Ukrainian IPOs.

Some useful statistics from Ernst & Young’s Michael Lynch-Bell and Oleksandra Dubovyk:

- About 80 Ukrainian companies will seek IPOs between 2008 and 2012, says E&Y
- About 20% of these will be financials and about 38% will come from retail and the consumer-facing sector
- Of expected IPOs, about 23% prefer the Warsaw Sock Exchange – Exile says is the right choice for smaller-larger and larger-medium-sized firms, much cleverer than AIM which Exile loathes – and about 11%+ will go to Frankfurt. Overall, though, about 66% will chose London (and 45% overall, will go to AIM). Exile would gently opine that AIM is what *the advisers* want you to choose, because they - and their cost-base, are based in London and need London-based fees, but on a IPO+5 years basis, Exile thinks vendors and CEOs will look back and wish they had chosen Warsaw; IMHO.

Actually, if there is one theme yours truly detected this week, it is the slightest disconnect between the surge of advisors into Kyiv, and the true underlying fundamental health of the new issues market.

Now, says Exile, from a cost, secondary market liquidity and practical POV, London may not be right for loads of CEE and Eurasian firms, especially when you start to compare Warsaw or Frankfurt, inter alia, to AIM.

Elsewhere yesterday, Andrey Pivovarsky gave a very interesting presentation – and overall I think Dragon Capital really impressed at this conference: very bright, very eager, professional and – actually - nice guys. Pivovarsky showed stats that the January and February new equity bookbuilding had been – as I think we all suspected – pretty ghastly. But he remains confident across the whole of 2008.

Nonetheless, while underlining that firms undergoing IPO this quarter raised much less – or the same at much lower valuations / a bigger slice of equity – than they initially planned for; certain themes are emerging to make an IPO a success. Now, I have to say, these are not rocket science and, if anything, show that some rational thinking has come to the emerging markets equity scene; but they are worth repeating even so:

- Investors will shun new issues where the free-float is too small (e.g. even below 3o%)
- High growth plays preferred over merely ‘domestic market sector stalwarts’ (PS: some of the Ukrainian financial-industrials groups will find themselves being penalized over their commodity-price vulnerable staples, says I, and should perhaps talk more about the wizzier parts of their portfolios).
- *Transparency* is everything. Dodgy history; less than stellar corporate governance structure or arrogant vendor-oligarch as CEO-God – forget it. You might have got such an IPO away even 9 months ago. In today’s still somewhat shell-shocked market; you may not.

Then Pivovarsky said something for which – football-player-stylee – I wanted to run on the pitch and hug him – the glory days of the last two years were over, he said, “and those who can, might be better to wait” a year or two, for the best equity valuations.

As he pointed out: investors want a ‘guaranteed’ (sic) 30% annual rate of return on new Ukrainian issues; given that there are now, globally, bond products out there – with arguably much less risk – offering 20% annual return.

One speech particularly caught my interest. Although densely argued, Clive Cook, from the London corporate governance team at Baker & Mackenzie, trotted through the difference between the obligations of firms listing on AIM, versus the main market.

Although AIM toughened up the rules applicable to AIM market-listed companies, and their NOMADs, it still strikes me that, if I were an institutional investor, I would always want a risk discount on an AIM-quoted company compared, for instance, to one quoted on Frankfurt.

PS: at one point, he argued that the London market(s) had the advantage because of the inclusion it gave you in the FTSE indices. Um…not so much. GDRs are not included. FTSE International was, for eons, a client of mine. It is a teeny-tiny technical point, but for firms like Ferrexpo (which, you may recall I pointed out issued Ords in London, and not GDRs), they get a liquidity boost, which *does* benefit share price, from being main market companies. Being part of, as I think Ferrexpo now is, the FTSE350, means that index tracker funds, set to that index, *have* to own the stock. As I said, it is a teeny-tiny point but, over five+ years, it *does* positively enhance share price performance.

Wednesday, 12 March 2008

Day 2: Blogging the Ukrainian Investment Summit, London

As is typical of these sorts of multi-day conferences, there was a 50% reduction in the delegate audience on day two, from day 1. That is not necessarily a bad thing: for these sort of things day one is boosted by government officials’ hangers-on and an ephemera of media. So the day II audience is more focused and less …um… star-fucky.

Yesterday (Tuesday, Day II) was banker day and the highlight session for yours-truly was the session on Ukraine and the Capital Markets; able chaired by Brian Best, of Dragon Capital, who gamely opened by saying: “Actually, the market sell-off around the world pretty much bypassed Ukraine; one of the few occasions the market’s lack of liquidity worked in our favour”.

The ebullient Sergiy Kulpinsky, equity strategist from Alfa Capital Ukraine, pointed out that only 6% of the shares of quoted Ukrainian companies are actually ‘free-float’; which is staggeringly small and reminds us that Ukrainian share prices (says Exile) are probably at the top of the market, even now.

Ukraine's PFTS index rose 135% in 2007; so don’t go hunting bargains in the Kyiv secondary market but, as it happens, there are some new issues coming through the next 2-3 years which, if not priced too greedily, are going to be interesting in the long term. That, of course, is the attraction of a market like Ukraine: long-term strong growth. But it is currently expensive to buy into.

Kulpinskiy – who is a very good speaker, BTW, a rarity at these events – went on with a nice analogy about ‘the good, the bad and the ugly’ and the Ukrainian Stock Market, the PFTS:

the good is the market and the expertise of the brokers there" [OK…um…nice sell mate] "the bad are the fundamentals of the market…inflation, soaring household debt and the fact private consumption is overheating.” [Spot on says I. Ukraine should have a wonderful next five years but it has got to sort out its inflation problem or else the pendulum could easily switch the other way]; and the ugly? “The politics: and the political risk discount international investors want on Ukrainian new issues”.

Nick Koemtzopoulos from Credit Suisse – whose speech was a curate’s egg - but the second half was way too low-brow for the expert audience he was addressing – enlightened us that the ‘emerging markets’ (the BRIC nations and the satellite economies that orbit around them) accounted for 33% of new equity issues, globally, last year. That’s more than Western Europe. But it is a tough market out there:

New equity issues globally:

2005 on 2004 up 190%
2006 on 2005 up 216% - a handful of mega-issues, like the giant Rosneft IPO out of Russia and China’s ICBC account for a big chunk
2007 on 2006 up 66%
Q12008 on Q12007 down 97% - in terms of market sentiment, a huge amount rides on how the Visa IPO goes later this month.

However, in Ukraine, 40% - forty percent! – of stock market new issues in 2007 were in real estate and construction. That’s a huge skewing of the market to one sector. Real estate and construction, of course, are highly leveraged plays on expected future economic confidence. Without continued confidence, those stocks can sink like a stone.

That said, what has stalled other global markets is the fall-out from the global credit crunch last year. Well for Ukraine, much more than Russia, the global credit crisis has so far been something that happened ‘somewhere else’. The Ukrainian market hasn’t been so affected by a lack of confidence in the banking sector.

Here the historically, relatively undeveloped banking capital market has had the unexpected benefit of protecting local market sentiment. This is because, due to country risk, Ukrainian banks have pretty much only been able to tap the bond markets for 1-year notes (rather than the 10-year, convertible bonds etc., issued by 1st world banks).

Now, on the one hand this has meant that many Ukrainian banks have to refinance, in 2008’s tighter markets, money they only raised in 2007. On the other hand, such tight borrowing conditions placed a limit on Ukrainian banks ability to leverage up - according to Dmitri Sredin from Troika Dialog’s primary debt team, 2008 refinancing risk for Ukrainian banks is low, he says, in 2008. In fact, only 2.8% of bank capital needs refinancing this year.

Exile says: that’s way lower than Russia – and even more so compared to poor old Kazakhstan whose banking sector is a mess – and this is important. 2008 should see a smooth banking sector in Ukraine and this, of all things, should help to underpin market confidence about quality new issues in Ukraine.

Statistic of the day:

In 2003 the corporate debt market (corporate bonds issued and new syndicated loans granted), globally, was worth $2.4 trillion in new deals done.

By 2007, this had ballooned to over $7.5 trillion (factoid courtesy Nicolas Lipovsky at Calyon bank).

Having more than trebled in five years, that’s not ‘strong global growth’, that is a huge debt bubble. Last autumn’s credit crunch therefore is something of a correction we really all ought to have seen coming and expected. The fact we all didn’t tell you how crap capitalists are when greed gets in the way of judgment. I calculate that as a CAGR of almost 26%; way outstripping nominal, annual global GDP growth.

PS: $6.7 billion of that debt growth, in 2007, was for Ukraine – $3 bn of it for banks – compared to $11.7 bn in Kazakhstan; sadly, for Kazakhstan, also mostly for banks.

Real Economy Stat of the day #1:

Ukraine is already the 7th largest new car market in the whole of Europe.

The top three are Germany, Italy and, at number three, Russia. This is a good reminder that you shouldn’t view the RUK markets (new buzz phrase: Russia, Ukraine, Kazakhstan) as emerging markets: they have pretty much already emerged. It is now all about market share.

Real Economy stat of the day #2:

Ukrainian real GDP growth in 2007 was about 7.5% - about the same as Russia’s – but inflation outstripped even Russia’s worsening record: 16.6% inflation in 2007 and is expected to be 17% +.

Exile - This, BTW, reminds us of yesterday’s macro-economic advice, from Anders Aslund, at the conference. Import inflation has to be sterilized ASAP through a re-valuation of the Ukrainian Hryvna against the US Dollar.

Tuesday, 11 March 2008

Blogging the Ukrainian Investment Summit, London

Monday through Wednesday inclusive is the 4th Ukrainian Investment Summit, organized by Adam Smith Conferences. It is a star-studded cast and, relative to many of the conferences I schlep to, more thought-provoking. It is a very well-supported conference, although the audience is only about 10% the size of that at the Russian Economic Forum in its halcyon days (which tells you a lot about the relative sizes of the investment markets).

The first speaker, Monday, was Richard Spring, the British, opposition Conservative MP, who is President of the British Ukrainian Society. I like Dickie: he is elegant company over a tumbler of whiskey. He is a charming old cove – very bright but likes to pretend otherwise – and made much of how “across both sides of the House of Commons – don’t worry about so-called Enlargement Fatigue – we will support Ukraine’s membership of the European Union” (pause for cheer which… um… didn’t come).

Of course, it is easy to support something not remotely likely soon to happen. Dickie Spring is likely to be gaga or even pushing up the daisies before Ukraine has any meaningful chance of accession. In terms of acquis communautaire it must be even ten years behind Turkey. So, you know, don’t hold your breath…

The opening session’s government speakers – three ministers no less – was a remarkable insight into how the Soviet-style of long speeches that rattle off statistics still is the preferred modus operandi of the post-Soviet politician. They were gruesomely dull to sit through.

Across the morning, the star speakers were from Ferrexpo, which had such a superb debut on the London Stock Exchange last year. Konstantin Zhevago is the acceptable face of oligarchy: the man is also a visionary and his commitment to professional management – his imported CEO, Michael Oppenheimer, spoke later in the day – transparency and solid corporate governance has been rewarded by a 160% rise in the share price since last year’s IPO.

Some notes from my speaker program (I do this at conferences like I do at the opera and ballet – but without the opera glasses):

- Konstantin Zhevago – everything that has been beneficial that has been achieved in the Ukrainian economy has been in spite of, not because of Ukrainian governments, he said.

- Dr Anders Aslund (Peterson Institute for International Economics, Washington DC – and a well-known Cold War-economic analyst, notably well-funded in the USA – winks – and sometime economic advisor to Ukraine itself): “Ukraine must break the link to the US$ in order to control inflation. The Government shouldn’t talk about it, it should just do it: and, as a first step, peg the Hryvna to a basket of currencies weighted towards the Euro

Exile opines: he’s right and Ukraine needs to revalue its currency to sterilize import-related inflation. I think it could now find a natural level 15-20% above where it is now against the USD, IMHO. It is a tricky issue though. Although nominally – indeed constitutionally, independent, the oligarchs have the National Bank of Ukraine by the balls, and don’t want a stronger Hryvnia which will take the steam out of the export growth of their heavy industries. Equally, a ‘basket of currencies’ reflecting Hryvna reality means a chunk of Russian rubles: monetary-nerd, President Yushchenko, would hate that. So it won’t happen just yet: the politics isn’t right, unless Yush’ thinks the Hryvna can jump straight to a free-float (which will be an econometric shock he will be afraid to risk).

Ilya Arkhipov, System Capital Management – sadly (I say sadly because I have a really good mate who works for SCM, who’ll read this, and will not be amused, but…) wins the raspberry award for worst speech. Although it was interesting for us to get a walk-around the lesser-known parts of Mr Akhmetov’s mighty empire, it would have been nice if he had addressed the issue (“Showing the experience of leading…investors”). Speakers from my region always ignore the issue and force-feed you an investor presentation; quite counter-productively so.

The foreign investor experience:

I thought this was a noteworthy bit. The two biggest foreign investors in Ukraine are Telenor (asset revaluation rather than hard cash) and ArcelorMittal (hard cash). Both have had an uneven experience, although rising asset values in the case of the former; and strong profits in the case of the latter, mean they will stick it out.

The speakers were:

- Ole Bjorn Sjulstad – very senior at Telenor; staggeringly bad speaker (who desperately needs help to be able to give an effective speech).

- Narendra Chaudhary – very, very senior at ArcelorMittal (and one of Lakshmi Mittal’s most trusted lieutenants BTW). I was, BTW, quietly appalled at the bluntly racist comments – in the audience murmur around me – while he was speaking. I was even more appalled that these insults were being whispered in English, as well as Russian.

Both these companies complain about the lousy rule of law in Ukraine, huge uncertainty over ownership rights, corporate governance and, of course, bent judges. The Mittal part of ArcelorMittal bought Kryvorizhstal, the giant, 46,000-employee steel mill, at auction (it having been seized by La Orangina, after the Revolution, from Renat Akhmetov, now one of the king-makers of Ukrainian political and economic life). Since then Kryvorizhstal has been plagued by union problems and last year, says Chaudhary, suffered 457 government agency investigations and enquiries: thus showing that Mr Akhmetov’s reach is modest compared even to his grasp.

Both being subject to poorly written and corruptly administered law, these two companies are *the* textbook examples about investment in Ukraine: “you should make good money, but it is the most risky place you’ll likely ever invest in and the one whose business environment is perhaps the least trustworthy”. I am slack-jawed at the (especially European) firms which blunder in there (“Ukraine is a democracy, it is more European. It is therefore less risky than Russia”) – completely talking out of their arses.

If these two firms united in delivering their message of optimism, hedged with criticism – and delivered it just a tad more effectively – even Ukraine’s notoriously self-obsessed and naval-gazing political elite might, you know, finally wake up and do something about it…

PS: Stefan Wagstyl, Eastern Europe editor of the FT, is a nice man who writes well and insightfully: he is hopeless, however, at chairing a panel session or acting as moderator of a conference. Memo to all conference organizers: stop using him! There is a skill to chairing a conference panel session effectively: he hasn’t got it.

PPS: Because Ferrexpo is actually a UK PLC which, via a Swiss vehicle, owns its Ukrainian assets (and therefore issued Ordinary Shares on the London Stock Market not, as is usually the case for CIS firms, GDRs), it is actually just a hair’s breath away from being elevated to the FTSE100, so great has its share price run been.

Now, if that happens the Kremlin sure will sulk: Russian firms issue GDRs, not Ords, in London so cannot be part of the FTSE100 (silly rule BTW). I met with one Russian mega-firm last week which wasn’t being very subtle about the fact that the Kremlin wants them to list *anywhere* other than London, even if just to piss on the British.

Friday, 7 March 2008

An abomination at the Bolshoi

“It doesn't matter how high you lift your leg.The technique is about transparency, simplicity, making an earnest attempt”.
~ Mikhail Baryshnikov

Three one act ballets at the Bolshoi: 28th February performance

This is a little overdue and I may not have bothered at all if it was not that rare thing for me to post: a very bad night at the Bolshoi. Just a few days after I saw the Mariinsky’s cool, artful professionalism, I was subjected to an abomination at the Bolshoi of such artless posturing, I despaired.

Just the day before, chatting to a chum, I observed that the fact artistic director, Alexey Ratmansky, was leaving the Bolshoi at the end of this year would, of course, please all the dinosaurs and that preening Nikolai Tsiskaridze, who I can’t stand. We now know who will replace Ratmansky: yay (BTW, a good article in that link).

I fear 2010 and after will see a Bolshoi ballet bounce between artistic chaos and a deadening, frozen-in-aspic cult of Grigorovich. I mean, I love Grigorovich as a choreographer – his Romeo and Juliet is a superb use of Prokofiev’s soaring score – but I don’t want endless Grigorovich.

Ballet, you see, is like football. It is about passion and teamwork and I feel about Tsiskaridze like my Tottenham Hotspur-loving boss (I know nothing about soccer, but even I know he must be plainly masochistic) feels about… um… Freddie Ljunberg! [That was so random – he is the only soccer player who popped in my mind]

So anyway: the atrocity of the 28th:

Three one act ballets:

- Class Concertchoreography by Asaf Messerer to a mélange of music arranged (well actually) by Alexander Tseitlin

A staggeringly poor performance by the Bolshoi Orchestra. The timing was way off on several pieces and, although actually a deceptively complex arrangement, second-line conductor, Pavel Klinichev deserved to be booed. The brass section was just ghastly – And at least twice was simply flat – and Klinichev appeared to be more spectator than dictator. Had they rehearsed?

Now this bit of dancing was good and in stark contrast to the two pieces which followed.

This piece is quaint and charming. Maria Allash was wonderful and Vladimir Neporozhny was also extremely impressive. Vyacheslav Lopatin – who I was to think so piss-poor later in the evening – did rather well here. He pulled off an extraordinary number of fouettés. The best performance came from the ridiculously young Ivan Vasiliev who performed with characteristic athleticism.

- Misericordes (known in the west as Elsinore) – choreography by Christopher Wheeldon to Arvo Pärt’s, Symphony Number 3

A change of conductor! A brilliant performance of this music: the Bolshoi Orchestra, which had played like a youth band in High School, now returned to being professional musicians in a world-class House. This music – which I have now heard three times (it was the third time I have seen this piece this year) – stayed with me all week and I just had to download it from iTunes. It made for a very pleasant accompaniment to my overnight train journey back from Kyiv that weekend.

However, while remembering to tug my forelock to the performance of Bolshoi principal soloist, Dmitriy Gudanov, I have to say that the choreography is just not good enough (geddit?).

Having posed the question once before, I now have a conclusion: Wheeldon is just overrated.

The Bolshoi troupe danced this proficiently but with a soul-dead lack of passion. This piece calls for the tautly-suppressed lust and rage of the human body (hello? It’s Hamlet set to dance?): it was like watching robots build an Audi. C’est magnifique, mais ce n’est pas la guerre.

This YouTube piece was a better night's dancing performance, but just listen to how bad the brass section is about one third the way through! I was there that night actually... I am worried for the Bolshoi Orchestra:

- In the Upper Room – choreography by Twyla Tharp, to sublime music specially composed by Philip Glass.

I know this piece quite well: this is the … ahem… sixth time I have seen it in the last twelve months.

It was danced by the same cast rotation as always.

This night, however, their performance was a crime against dance.

- Andrey Merkuriev (who usually I highly rate) was utterly atrocious. Was he drunk? I have never seen such lack of precision and his partnering was abysmal: twice he nearly dropped a ballerina.
- All the girls were very weak: even Natalia Osipova, who did a very convincing impression of not having rehearsed and actually not much caring that we guessed she hadn't either
- An uncharacteristically weak performance from Vyacheslav Lopatin. Overall, the ensemble seemed self-obsessed, cynical and indifferent to the fact they were performing in public.

They deserved to be booed off the stage. Had it been London, we would have done! But sometimes, I am reminded, Russians will clap and cheer just about anything: a sort of dancing bear syndrome.

I did not applaud, except briefly, directed at Denis Savin. I have enjoyed watching this young dancer develop over the last four years: I thought him consistently superb in the current production of Romeo & Juliet in repertory and I very much enjoyed him the … ahem… seven times I saw him as Dimka in Shostakovich’s the Bolt.
Mr Savin appeared to be the only performer on stage wholly committed to the faithful performance of Twyla Tharp’s brilliant creation.
Part of a trio, he was ably supported by Anton Savichev and Alexander Smol’yaninov (the latter has potential I think), although at one point I thought they were going to drop Natalia Osipova.
By this point in her ‘performance’, however, I almost willed them to do so.

No, no, no (off topic, but MY topic): do not demonize the pilot

Amongst my many failures as a human being – I am Catholic, OK? (lovin’ it, BTW) so I embrace my lifetime in sin - is my rather schizoid fear of flying…

Like most Net-literate people, I have seen *that* video. Lufthansa. Hamburg.

No, no, no! The pilot did exactly what he should have. It was a bad flight – and, yeah, truly I would probably have shat myself if I had been on-board – but it was by no means ‘the one’ (you know, ‘the one’ – the flight all frequent flyers believe is their ‘number up’)

Gusty wind is gusty wind. It sucks. But the video is hugely misleading. The wing *did not* scrap the ground: we’d have body bags it if did.

Not a nice flight, but rest assured what you think is ‘impact smoke’ is just jet-back of runway surface water. Clearance levels were really better than they appear, filmed at that angle (I guesstimate above 5-7 feet: not nice, but not fatal).

Neither pilot nor ATC mis-performed and, in the cockpit, the captain would have yelled “TOGA”* in time.

* TOGA = “Take Off & Go Around”. In one client mandate, a rather infamous... um... actually ‘terrorist’ court case, I listened to the Cockpit Voice Recorders (CVRs) of several fatal air incidents – my fear of flying, as a non-pilot, I grant you ridiculously, started then – it is the ones where they yell “TOGA!!!”, followed by “arrgh, shit” etc., that leave a lifelong mark…

But this whole viral YouTube thing is a good example of how YouTube vid’, from a certain angle, displaces the possession of truth. Something, in a bunch of circumstances, we would do well to remember.

Wednesday, 5 March 2008

“They’re stealing the gas, Nancy, they’re *stealing the gas*”

Gazprom is spending a shed-load on some well-connected PRs right now. Friend-of-Dmitry-Peskov, the US PR firm, Ketchum, runs a global program. Now Ketchum is a well-known consumer PR firm in the USA, but something of an also-ran (IMHO) in the rest of the world (and has, BTW, the most irritating *cutesy* web-vid intro on its website, the "greeters", ugh, which appears to assume the readers, the potential clients, are morons). It was lucky to get this, because this is a big, complicated mandate for a largely consumer PR firm, but its long-standing, Russian partner, Michael Maslov, has solid Kremlin connections.

...and breathes in... But through its Omnicom parent, Ketchum has some partners with clout, like the respected Gavin Anderson, the financial spin doctors. The point is, while I like and admire Michael (we alternate to buy each other dinner), what are all these *global* people doing for their fees?

Get the job done guys and, if you can’t get it done (perhaps because – and I know the score and how this works in Russia – the client was obliged to hire you, on instructions, but now ignores you), then quit the mandate. Big fees or no big fees, in the long run you suffer, or your reputation does, if all you do is bank the cash and merely spectate as a client’s global reputation collapses. But what do I know, maybe they’re actually slaving away and a client fight-back is about to materialize. If so, news cycle, guys, news cycle: are you acquainted with them?

What I do know is that I have worked for a company once described as “the most hated company ever to launch an IPO”, and we did stuff. It worked.

Anyway, my 'outburst' comes as the liberal, anti-Russian media in the UK delivers an astonishingly one-sided reportage of the Gazprom-Ukraine dispute (examples here and here).

The western media isn’t telling you that, quite aside from a payment track-record that makes a sub-prime mortgage holder a good bet, Ukraine is *stealing the gas*, siphoning it off, as it transits Ukraine into Western Europe. Where does Naftogaz Ukrainy let it go to? Well let’s just say that the corporate profits of some Ukrainian oligarchs' heavy-industrial businesses are looking surprisingly robust in the face of fuel cost rises over the last two years…

But the key thing is this, the ‘free press’ of the West just doesn’t like the idea that ‘democratic’ Ukraine (“they won Eurovision, they had a revolution, they can do no wrong”) could be anything other than on the side of the angels. The western, liberal media is so bound up in its hate (and I don't think that word is too strong) and suspicion of Russia, it will (and does) self-edit to bring you the story that always puts Russia in a bad light.

- Ukraine stealing gas? Ignore – our readers/viewers need only know that Ukraine is ‘free’ and is ‘pro-western’
- Russia reacts by reducing the flow by the amount it steals? Boo Russia!

This email conversation, yesterday, with a new political friend in the UK sets this in context (I hope):

From: New political friend in the UK
To: Red Exile

…[…]… Also, I saw that the new President of Russia has cut off gas supplies to the Ukraine. What is life like out there when these sorts of things happen?

From Red Exile
To: New political friend in the UK

“Re: Ukraine – LOL. GAZP didn’t cut them off; just reduced the supply by the amount that Ukraine is illegally skimming it off and siphoning to some dodgy industrial clients on the side. Really, the UKR gas company uses the fact that it transits most of Europe’s gas to hide what Naftogaz Ukrainy, the gaz monopoly, steals. This brokers’ note [it is an extract from one issued yesterday by Renaissance Capital – Exile] explains more:

“Event: Ukraine's dispute with Russia over gas supplies took a turn for the worse on Monday (3 Mar) as Gazprom cut supplies 25%, or around 30 mcm/day, in response to non payment by Ukrainian counterparties. NAK Naftogaz Ukrainy later claimed the actual reduction was 35% (46 mcm/day) though Gazprom has not confirmed this. To put the cut in perspective, Interfax reported that Ukrainian consumption was running at around 150-156 mcm/day last week.

“The Financial Times's Web site reported NAK as claiming it has enough gas in storage after a mild winter to withstand such constraints for a month. Even if this claim is exaggerated, it appears that yesterday's developments are a measured increase in pressure by Gazprom, rather than an outright attempt to force the issue to a crisis. The haggling over gas imports and the division of the spoils from the Ukrainian supply market could go on for some time still. Although we continue to believe that Gazprom chairman Dmitry Medvedev will not want his moment of victory in the presidential elections spoiled by this dispute, it is clear that Gazprom has no intention of surrendering out of deference to the political calendar.

“We are concerned by NAK's claim of a larger supply cut than Gazprom has admitted to. Only one figure can be correct, and NAK's record exposes it to the suspicion that it is preparing to resume illicit siphoning, which would seriously damage the aspirations toward integration with Europe that the government is voicing more and more loudly.

From: New political friend in the UK
To: Red Exile

… […]…It's really bad news if the UK press is reporting this in such an anti-Russian way. I was also surprised by Gordon Brown's response that the new Russian President will be 'judged by his actions' - hardly warm words for an incoming world leader (who happens to be pretty friendly with Iran!)...

Well, yes, indeed.

The title of this post was inspired by this, wonderful West Wing moment:

PS: Just loving the news that Hilary did so well in yesterday’s Primaries: you go girl!

Declaration: the more I see of Obama, the more I think he is too proud, too-pretty-speech-no-substance and just not the person the rest of the world needs to have in the White House right now.

Viewpoint: McCain beats Obama; but only Clinton can beat McCain