HOST: Let’s talk about Russia. The country is still digesting news that Vladimir Putin could conceivably be President from next year until 2024. So far under his rule moves to modernize economy have been few and far between, some would argue. So how easy is it to do business in Russia, should you be investing? Our next guest joins us from an event called “Russia Calling”, aimed at attracting foreign investments. Andrei Kostin is the Chairman and President of VTB Bank, Russia’s second largest. Good morning to you, sir.
ANDREI KOSTIN: Morning
HOST: Let’s start with the politics and what is happening here, because that is what has been making headlines of late. Is it inconceivable that Mr. Putin will not be President?
ANDREI KOSTIN: Well, I think it’s a good sign, it’s good for Russia. Mr. Putin is a real leader of Russia, I would say he is father of the nation and he has a lot of popularity, and he was always conducting liberal economic policy.
HOST: From an external point of view this looks like the rule of law, the rule of democracy is being flouted, and that says something about the way the business operates in Russia, that it is hard to navigate, it is difficult to deal with. Surely this is sending the wrong message to the rest of the world.
ANDREI KOSTIN: I don’t think so, because we have a democratic procedure of elections. Of course, Mrs. Thatcher once said that the only public opinion poll that does matter is actually at the elections. So we all have to wait and see, but Mr. Putin, according to all the public opinion polls, has very high popularity in Russia, very high public support. If it isn’t so, I don’t think he will nominate himself for the presidency.
HOST 2: Mr. Kostin, when we speak to investors who are based out of Russia, that’s what we hear, that he is a popular man, that he knows what he is doing with business. But when you are sitting outside of Russia, that’s not the impression, because essentially when we look at the BP story, and you go forward into other stories of investors in Russia, they look at this as a massive problem. Do you see foreign investors, foreign direct investment even, pulling out of Russia if this happens?
ANDREI KOSTIN: I think any emerging market has its own difficulties. On one hand, if you look at fundamentals of the Russian economy, they are quite good. We are not spending so much as Greece, for example. We might even have this year a surplus budget. So, we are lowering down inflation, we are conducting a very open currency policy, so I mean, there’s a lot of attractions to the Russian economy. But, on the other hand, there are certain problems we experience. One of them is in the area of legislation, and that’s a recognized problem, the government recognizes it and is trying to improve in this and other areas, when investors still experience problems, while investing in Russia.
HOST: Yes, that definitely needs to be fixed, and that’s been a problem for a long time. Mr. Kostin, you talk about the strength of the Russian economy, one of its strengths is that it is based on resources. You are a resource-rich country, the global economy is slowing down. Demand for those resources is going to be lower going forward, at least in the short and medium term than it has been for the last few years. That’s bad news.
ANDREI KOSTIN: Well, you can’t change the structure of the economy quite quickly. I think both Mr. Putin, and I think people in the government, Mr. Medvedev, they recognize the problem that Russia does need restructuring. Yes, we are very much dependent on not only oil, but on other commodity prices, and we are watching very carefully, of course, what’s going to happen to the global markets. But recently Russian government adopted a number of very important decisions in order to speed up the process of modernization, introducing innovative economy, but it takes time.
HOST: Tough questions for the economy, tough questions politically. Andrei, thank you very much indeed for answering them. Andrei Kostin, Chairman of VTB Bank.
ANDREI KOSTIN: Thank you very much, bye-bye.