|RUSSIAN BUSINESS MAKES UP FOR LOST
MOSCOW. (RIA Novosti economic commentator Alexander Yurov)
As many as four U.S. companies have come under control of Russian capital
in the past two years. Late last month it was announced that Russia's
Evraz Group was buying a 65% stake in Oregon Steel Mills, a U.S. steel
maker, for $2.3 billion. This caused some agitation among foreign
observers, who saw hidden dangers in this development.
However, there is nothing extraordinary about Russian businesses looking
for and finding ways to enter foreign markets. This is fully in line with
the general global trends.
Importantly, this is not the first transaction between American and
Russian companies. Earlier this year, Evraz Group paid $110 million for a
73% stake in Strategic Minerals Corporation. In 2004, the oil producer
LUKoil acquired 100% of Mobil for $266 million. Before that, Severstal
dished out $286 million for Rouge Steel.
As for the deal between Evraz and Oregon Steel, it is the first time that
a Russian company is willing to spend such a huge sum on production assets
in the United States. Perhaps, this is why the excitement around it is
even bigger than the one caused by Chinese Lenovo's intention to take over
IBM. The Chinese company eventually paid $1.5 billion for the asset.
Yet recent successes of Russian companies in buying assets in the U.S. do
not mean that they have become especially active in global mergers and
acquisitions. Out of 100 largest holdings representing emerging economies
or markets in transition on the global market, only seven are from Russia,
compared with 44 companies from China, 21 from India and 14 from Brazil.
Russians' activity is comparable to that of Mexico and Turkey.
The UN Conference on Trade and Development ranks Russia 16th among global
investors. The aggregate cost of Russian assets abroad does not exceed $13
billion. At the same time, three times of this sum – $40 billion – was
invested in Southeast Asian economies last year, while global direct
investment totaled $916 billion, with European nations accounting for over
$400 billion and the U.S. for about $100 billion. Russian money is just a
small fraction of this flow.
But the situation is changing fast. Before 2006, there was not a single
Russian company among the 50 multinationals representing emerging markets.
Now Russian firms are holding the first places in the ranking compiled by
Russian businesses are increasingly often reaching beyond domestic borders
and announcing joint action with their foreign partners on the
international market. Last fall brought news of several large
transactions. In October, oil giant Rosneft (with at least 70% owned by
the government) signed a protocol with China National Petroleum
Corporation on the set up of a joint venture, Vostok Energy. Novolipetsk
Steel applied to the European Commission for permission to buy stakes in
Duferco and Steel Invest. Before that, Russian businessman Oleg Deripaska
bought a stake in General Motors. Russian business is becoming globalized,
and this process cannot be stopped.
The BRIC's Dream research findings published by Goldman Sachs last May are
fairly well known. The company's analysts concluded that the economies of
Brazil, India, China and Russia would become the largest in the world by
2050. At least, India's and China's GDP will be comparable to the U.S. GDP
by that time, while Brazil and Russia will leave leading European
economies behind. Russian per capita GDP is projected to be equal to that
of Germany and Italy in 50 years.
The world will see a peak of global growth within the next ten years,
Goldman Sachs said. It will be based on economic achievements of the BRIC
countries. In the near future, these countries will account for one third
of the global economy.
So it would be wrong to view Russian companies' success abroad as evidence
of the Kremlin's new geopolitics. It is just that for a number of reasons
Russia has found itself in a position when it has to make up for lost
time, re-acclaim lost markets and recover lost profits. -0-