Posted on 10/29/2002 6:50:00 PM PST by Destro
Russian economy forges on as confidence stays strong
Violent siege leaves business unfazed
By ANDREW HURST
Reuters News Agency
Monday, October 28, 2002 – Page B8
MOSCOW -- A violent hostage siege by Chechen guerrillas has jangled nerves of bankers, business people and investors, but apparently done little to undermine confidence that Russia's economy can steam ahead.
The economy, which came close to collapse after a debt default in 1998, has been revived by booming oil exports and rising investment, encouraged by a string of market reforms by President Vladimir Putin's western-leaning administration.
"I don't believe this will have a long-term negative effect on investment," said Robert Brown, president of First Russia Capital Corp., a company that is active in real estate development in Moscow.
The hostage drama was brought to a brutal end on Saturday when Russian special forces stormed a theatre in Moscow where about 50 Chechen separatist guerrillas were holding more than 800 hostage. Some 117 are reported to have died in the operation.
Despite the heavy death toll, Mr. Putin's firm handling of the crisis suggested his government's ability to pursue an economic reform agenda had not been seriously undermined.
And following the Sept. 11 attacks on the United States, which dramatically exposed the vulnerability of the United States as a democracy at bay, the Moscow hostage drama could even play into Mr. Putin's hands, said analysts.
"Russia seems more like one of us," said a West European economist, who asked not to be named.
"There is this worldwide phenomenon called terrorism and Russia is not on the side of those plotting things. Mr. Putin can to some extent exploit this," he added.
Unless Chechen guerrillas follow up with a spate of new attacks, business confidence should remain unscathed. "If there is no follow up, I don't think there will be any negative implications," the economist said.
Russia's burst of economic growth over the past three years has been driven by local businessmen upgrading oil and metals companies acquired in the 1990s after the collapse of the Soviet state.
Foreign investment has played little part in the action.
Billions of dollars stashed abroad by Russians, alarmed by political instability under former president Boris Yeltsin, have started to flow back into Russia as investors are increasingly impressed by Mr. Putin's determination to modernize the economy.
"We have done studies which show a lot of the capital repatriation is related to perception of reforms going ahead, it's not driven by short-term perceptions of bond yields," said a top international official who requested anonymity.
"I don't see anything changing this perception fundamentally," said the official.
A lawyer with an international law firm said the hostage drama had done nothing to diminish Russia's attractions as a place to invest.
"I do not think people will see this event as making any difference to the fact that the Russian economy is still very attractive," said Dimitry Shiyaev.
But financial markets might react nervously today when trading of bonds and stocks resumes. Russian share prices dropped on Thursday, the morning after guerrillas seized hostages, although bond prices barely flinched.
No wonder Neo-Cons can't stand Russia.
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