Western banks abandon Russia

March 3:

Several western banks are abandoning their attempts to do business in Russia. According to Bloomberg, at least six European and U.S. banks have announced plans over the last year to either cut back their operations in Russia, or close up shop there altogether. The institutions in question include Morgan Stanley, Spanish lender Banco Santander, and Britain's Barclay’s. Though the Kremlin has begun a new push to build its fledgling mortgage industry, many foreign investors and companies have found it difficult to cope with the country's state-owned institutions, which maintain control over half of the banking system’s total assets, and are only growing with time. Other banks, however, are staying, and Russian banking analysts remain bullish. “Russia remains a growth story, and there is huge potential for banks to tap the rapidly growing consumer lending market,” says one banking expert in Moscow.


March 4:

Current estimates suggest the Kremlin faces the loss of up to $10 billion in arms contracts as a result of continuing unrest in the Arab world. With the recent international embargo placed on Libyan leader Moammar Gadhafi, reports UPI, Russian state arms exporter Rosoboronexport already stands to lose $4 billion in contracts with Tripoli for fighter jets and tanks. But Libya could be just the tip of the iceberg; Russian defense industry sources estimate that the total costs of cancelled arms deals and lost revenue for Russia's massive arms sector as a result of the so-called "Arab Spring" could be more than double the revenues already lost in Libya.


March 5:

Computer software giant Microsoft has become among the first Western companies to invest in the Kremlin's new Skolkovo innovation hub. According to the Moscow Times, Microsoft recently provided the first seed money to an anti-piracy startup company named Pirate Pay. The company reportedly has received $100,000 to pursue the development of new technology intended to prevent the unlawful uploading and downloading of copyrighted music and audio files. Microsoft has further announced its intention to sponsor 100 IT startups over the next decade, with grants varying from $30,000 to as much as $500,000.


March 6:

IKEA, the world's largest home furnishings retailer, has refused to expand its operations in Russia until authorities stop “withholding permission” for the construction of two outlets in Samara and Ufa. Bloomberg and London's Guardian report that IKEA's announcement reconfirms the company’s freeze on expansion, initially put into place back in June 2009, following claims of extortion by local officials. “The reason the stores aren’t opening is that IKEA is refusing to pay bribes to safety inspectors,” the head of the Moscow-based NGO National Anti-Corruption Committee has said. “We have zero tolerance on corruption and we have a very clear policy,” confirms Per Wendschlag, IKEA’s managing director.

[Editors' Note: IKEA is hardly alone in the hardships it has experienced in dealing with Russian officials and regulations. Royal Dutch Shell, Nestle, Wal-Mart and Carrefour have all had similar struggles with Russian bureaucracy. All but Nestle have since quit their operations in Russia.]


March 9:

Russia's ruling United Russia party is laying the groundwork for a new, tougher anti-extremism law, the Moscow Times reports. "Calls for ethnic hatred pose a serious threat to public safety, and the upper ceiling for perpetrators should be raised," United Russia official Andrei Nazarov has written in a commentary for the party's website. Nazarov's claim, which can be seen as a trial balloon for harsher penalties for conduct deemed "extremist" by authorities, follows a meeting of the Russian Lawyers Association in which participants proposed upping the penalty for violations of anti-extremism measures already on the books to a maximum of ten years in prison. Nazarov, who also serves as a member of the Russian Duma and in that capacity chairs the Russian lower house's Legislative Committee, has said that it would soon begin drafting an amendment to existing anti-extremism legislation that would codify the stiffer penalties.