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Opinion: The Alfa Bank report and spinning the wrong spin


MOSCOW, (RIA Novosti political commentator Peter Lavelle). Chris Weafer, one of Moscow's most respected and knowledgeable investment analysts and chief strategist at Alfa Bank, has been grossly misrepresented in Russia media as promoting ideas and a political agenda not remotely associated with his meticulous and balanced research.

Weafer is not a "spin-doctor" - he objectively assesses political risk for foreign and domestic portfolio investors. Unfortunately, some in media have misconstrued Weafer's words and the attitudes of investors concerning Russia's politics.

On July 8 Weafer released a reported titled "Russia Investment Case: Political Risk and Kremlinology." In the 44-page report, he provides a panoramic review of Russia's current economic and political situation. Starting with the chapter "Kremlin: Split or Squabbling," Weafer starts out by explaining the meaning of "Yukos affair," the government's economic goals, the likelihood of an "Orange Revolution" in Russia, and who might succeed President Vladimir Putin when he is expected to leave office in 2008. It is the issue of Putin's "successor" that has (incorrectly) captured considerable media attention.

Weafer writes: "There is already a great debate over succession options to the presidency with the merits or otherwise of potential candidates regularly mulled over in the media. While the ideal scenario for investors is some mechanism that sees President Putin remain in office (after all, one of the characteristics of previously successful emerging economies is the longevity in office of a strong leader) the important issue is whether any successor will come from within the existing power structure ([Defense Minister] Sergei Ivanov, [Presidential Envoy to the North Caucasus] Dmitry Kozak, and [Railways Minister] Vladimir Yakunin). If so then there will be minimal deflection from the route that Putin would have followed."

On July 15, Izvestia replied to Chris Weafer, "who writes that the ideal scenario for investors would be one permitting Vladimir Putin to remain in power in 2008." During an Ekho Moskvy radio interview the same day with spin-doctor Stanislav Belkovsky, he stated, "I think that the Alfa Bank analyst is quite right to some extent. Indeed - for certain [business] owners incorporated into a certain social and political system, which has evolved in the country by now, Putin is an ideal [figure]."

At the very least, both commentaries misinterpret Weafer's words; at most, Izestia and Belkovsky appear to have only read Weafer's "summary points" on page 5. A careful reading of "Russia Investment Case: Political Risk and Kremlinology" sheds considerable light on how Russian politics work. Additionally, Weafer provides well thought out scenarios as to how the upcoming political season - parliamentary elections in 2007 and presidential in 2008 - may play out. Weaver does not present his personal preference or the preference of his employer - Alfa Bank.

The sentence fragment that has caught some attention "the ideal scenario for investors is some mechanism that sees President Putin remain in office" does not mean, within the context of the entire report, that foreign investors expect Putin to remain in office. Actually, Weaver's words should be interpreted in the following way.

First, foreign investors fully expect that Putin will leave office once his term ends. Second, the "ideal scenario" is a transfer of power within the framework of existing laws. Third, the "ideal" candidate for foreign investors is a person who will continue the Kremlin's overall economic priorities initiated by Putin in 2000. Such expectations should not be considered out of the ordinary - investors worldwide always deem political stability desirable to protect the value of their portfolios.

Izvestia also casts doubts on Weafer's commitment to democracy and democratic institutions with the words, "Business does not grow when democratic norms are suppressed, and democracy and democratic procedures guarantee stability." In theory, Izvestia may be correct. Izvestia also writes, "Genuine stability is not only the possibility for a highly rated politician to remain in power maximally long. Genuine stability entails a scrupulous and meticulous compliance with the democratic procedure." Again, Izvestia demonstrates it knows something about democratic political theory. This is all and fine, but Weaver is a financial analyst specializing in political risk analysis.

What Weafer may or may not think about democracy in Russia is immaterial in terms of his report. That said, his careful and very accurate review of the state of Russia's liberalism, opposition parties, and electoral laws are nothing less than splendid. His job is to analyze and report on the present situation and potential scenarios allowing investors to make future financial decisions. Having read Weafer's analysis for a number of years, I have no doubt he has a very strong commitment to a strong democratic Russia, but I also know very well that he allows investors to draw their own conclusions about such ideas as democracy and freedom.

Chris Weafer should be complimented for his work analyzing Russia's politics and investment attractiveness (and unattractiveness). He does not claim what Russia should be like, rather what investors could expect based on number of carefully researched scenarios. Weafer comes to a number of sober conclusions when guiding investors and wisely leaves it to the Russians themselves to decide the nature and course of Russia's democracy.

The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.

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