Geert Bekaert and Campbell R. Harvey's
Chronology of Economic, Political and Financial Events in Emerging Markets
Major Political and Economic Events
The 1991 investment code guaranteed foreign investors rights equal to those enjoyed by Russian investors.pp
Moscow Interbank Currency Exchange (MICEX) was founded and owned by 32 commercial banks and institutions. It is the official venue for foreign currency trading and the exclusive exchange for trading government securities.a8
Russia's privatization of some 18,000 firms began.a8
The first ADR for a Russian company was issued.a8
The Federal Commission on Securities and the Capital Market of Russia was created and assumed regulatory powers from the Finance Ministry and the State Property Committee.a8
Nonresidents were allowed to purchase up to 10% of the issue of domestic treasury bills.a3(first entry)
Foreign investors were exempted from customs duties on imports of machinery, equipment, and components under contracts signed before Jan. 1, 1993, as well as similar goods financed by credits provided to the Russian Government by foreign countries and international organizations.a3
ADR effective date. (Company=SUN INTERBREW CLASS B - 144A, Exchange=PORTAL)a11
The over-the-counter Russian Trading System (RTS) was created. It is a nonprofit and off-exchange Nasdaq-like system. It improved market transparency by publishing prices and transaction volumes.a8
The Law on Banks and Banking Activities was passed. The CBR (Central Bank of Russia) began to use its new authority to revoke licenses when banks reported incorrect data, performed operations outside the area for which they were licensed, evidenced an unsatisfactory financial position and/or could not fulfill obligations to depositors and creditors. But CBR cannot shut now the operations of unlicensed banks.a8
Banking crises: interbank loan market stopped working; concern about connected lending in many new banks. a2
The Law on Banks and Banking Activities passed by the Duma lays out rules for licensing bank operations and requiring reports to the CBR.a8
The introduction of the Insider Trading Laws.a4
The Securities law designated the FCSM as the successor organization and as supervisor of the securities market. The CBR and the Ministry of Finance retained limited supervisory roles. The CBR is responsible for registering new share issues for banks.a8
The CBR instituted a reporting system to help them evaluate banks' financial condition.a8
MICEX launched futures contracts on GKOs (federal government debt issues) and US$/ruble.a8
S&P gave Russia a BB- credit rating , while Moody's issued a Ba2 rating. IMF mission delayed its approval of a $10.1 billion loan installment. The Russian Central Bank cut its reserve requirements on demand and term deposits to 16% and 13% respectively. Yeltsin would undergo heart surgery.
President Boris Yeltsin's heart surgery had gone well. On November 21, Russia launched its first pot-revolution Eurobond issue of $1 billion.
A more investor-friendly Unit Investment Funds (UIFs) were launched by Presidential Decree.a8
The Russian government ordered more than 800,000 companies to reevaluate their assets to eliminate distortions resulting from the Soviet-era accounting system and recent years of hyperinflation.
President Yeltsin was hospitalized with pneumonia. Russia's lower Parliament approved the government's 1997 draft budget, which envisages a 3.5% budget deficit. A presidential decree will impose taxes on utility profits based on cash accounting rather than accrual accounting.
The lower parliament passed restrictions on foreign investor activities, in particular, on the transfer and sale of telecommunications and energy shares.
The Moscow Stock Exchange (MSE) was formed, aimed at developing retail securities trade. a8
Anatoly Chubais was appointed as first deputy prime minister.
MICEX was licensed for equity trading and by the end of the year listed nine shares and traded 18 others.a8
Presidential decree limited foreign ownership to 9% of Gazprom capital, and participation is only possible through its ADR program. 
The FCSM assumed responsibility for registering new share issues and reports. It issued the CBR a three-year general license to license and supervise securities activities of banks. The Ministry of Finance is responsible for registering insurance company securities issues, T-bills, and municipal and regional bonds.a8
The Russian government created a new State Commission for the Protection of Investors' Rights on the Russian Securities Market chaired by the Prime Minister.a8
The FCSM issued licenses to two self-regulatory organizations (SROs) to assist the Commission in regulating and supervising broker/dealer and registrar activities by establishing rules for their members and ensuring compliance.a8
Heavy selling in Hong Kong caused a domino effect in other emerging market. 
Eleven stock exchanges and organizers of trading had been licensed by the FCSM (Federal Commission for the Securities Market), a substantial consolidation of the market.a8
A hike in the central bank refinancing rate to 28% from 21%. Government reshuffled.
Illness of Yeltsin. The World Bank approved $1.6 billion in loans to Russia.
The CBR introduced a new Chart of Accounts at the beginning of 1998 as a major step toward international accounting standards.a8
Oil companies YUKOS and Sibneff plan to merge.
(Provisions specific to commercial banks and other credit institutions) The open foreign currency position of commercial banks was limited to 20% of the capital for all currencies and 10% of capital for any individual currency. The limits are applicable on a stock and transaction date basis.a3
A Moody's downgrading of Russia's long-term foreign currency debt, currently Ba2. Rostemecom listed on NYSE.
A Presidential Decree placed supervision of VIF's under the FCSM, raising the possibility that these funds might be converted into the more investor-friendly UIFs.a8
The central bank cut the refinancing rate from 36% to 30%. President Yeltsin fired his entire cabinet.
A new general bankruptcy law was enacted.a8
Sergei Kiriyenko was approved as Prime minister.
Stock market reached a two-year low. The government failed to collect enough funds from T-bill auction to repay outstanding debt. 
The government adopted a program to strengthen laws and regulations protecting investors' rights.
            9808 The crises in the Russian financial system reached its climax in August. A three-month moratorium on debt payments, more than 50% devaluation of the ruble, halting of foreign exchange trading on MICEX, and news of debt rescheduling that will lead to unprecedented losses for investors combined to literally crush the Russian stock market. 
        980827 Traditional auction trading sessions which had been held on MICEX since 1992 were terminated.a8
            9809 Several liberal reformers have resigned, including the head of the Russia’s Federal Securities Commission. Russian equity market reached historically lowest level, with IFCG indexes dropping by 45%.
        980903 The CBR introduced a new instrument, the Central Bank bond.a8
            9810 The central bank announced a plan to create a center for financial rehabilitation of banks.
         981006 A new foreign currency trading regime came into effect on MICEX. Two special sessions are held: (1) a morning session is limited to the CBR, importers, and exporters; and (2) an afternoon session is for banks trading for their own account, to the extent permitted by CBR regulations. The CBR introduced new regulations requiring exporters to sell 50% of their proceeds on MICEX. a8
            9811 Talks with the IMF over the resumption of a $22.6 billion loan program have been stalled due to disagreement over the government’s draft 1999 budget and economic policy plans for the next year. Deputy Finance Minister said the country would be unable to repay more than $10 billion out of $17 billion of foreign debt falling due next year. The VAT tax rate was  lowered from 20% to 14% and corporate tax rate from 35% to 30%.
            9812 The Russian government signed a GKO/OFZ restructuring plan, which plans to redeem 10% of GKO/OFZ with cash, exchange 20% for zero coupon bonds, and exchange 70% for new fixed-coupon securities with maturity between four and five years. 
         990101 (Provisions specific to commercial banks and other credit institutions) The open foreign currency position of commercial banks were limited to 20% of the capital for all currencies and to 10% of capital for any individual currency.a3
            9901 Russia’s State Duma lower house parliament passed amendments to a key bill on gas supplies, increasing the state’s stake in gas monopoly Gazprom and restricting  foreign shareholdings in the company. 
         990312 (Provisions specific to commercial banks and other credit institutions) Sanction were introduced on banks violating reporting requirements on foreign exchange transactions. The regulation prohibits access of violating banks to the foreign currency market for transactions on their own account and that of their clients.a3
            9903 The government released a debt restructuring scheme in which the government would allow holders of defaulted debt to invest cash proceeds into equities
         990331 (Provisions specific to commercial banks and other credit institutions) Banks were subject to a 100% reserve requirement on the funds in transit accounts.a3
            9903 Crude oil prices increased.
            9904 Government and IMF reached an agreement that clears the way for at least $ 4.5 billion in new loans. The lower house of parliament adopted amendments to the Public Company Law that will retail investors to participate in IPOs and rights issues.
Prime Minister Primakov was dismissed, but soon recovered.
The IMF loan and agreement to reschedule approximately $8 billion of Paris Club debt became due.
Prime Minister Stepashin was replaced by Vladimir Putin.
A wave of bombings linked to fighting in the Caucuses, together with the rapidly unfolding Bank of New York scandal sent foreign investors off in droves.
The chairman of the Federal Securities Commission resigned.
The IMF postponed the release of a $640 million loan installment to the country as the war in Chechnya continued to draw criticism from the West.
Parliamentary elections successfully completed. The President Yeltsin suddenly resigned on Dec. 31.
Vladimir Putin was elected and announced tax reforms. Energy major RAO Gazprom, in collaboration with Italy's ENI SpA, won a deal to supply natural gas to Turkey.
The government announced a reform program targeting economic growth, with deregulation of railroad and energy monopolies, investor protection, and changes in the banking and social security systems.
President Putin stressed again that privatization would not be reviewed. S&P gave a 'B-' rating to Russia's eurobonds offered for the London Club. The government would push its wave of investigations of big companies and oligarchs.
Tensions between the telecommunications sector and the Ministry of Communications increased.
Russia failed to reach an agreement with the IMF to reschedule a US$42 billion debt. S&P upgraded Russia's foreign currency issuer rating from selective default grade (SD) to 'B-'. Several corporate scandals hurt minority shareholders' interest.
The government announced a reform program emphasizing investor protection measures.
RAO Gazprom issued American depository shares after transferring shares to its Netherlands subsidiary. Three other companies also launched ADRs. The sale of 85% of NORSI oil was approved. Legislation approved private ownership of nonagricultural land and corporate profit tax cuts from 35% to 24%.
In the second quarter, LUKOIL floated 6% of government shares on the London Stock Exchange and formed an informal industry alliance with YUKOS, Tyumen Oil, and Sibneft.
Russia agreed to repay its full debt obligations.
S&P raised the Russian Federation's sovereign credit rating to 'B'.
Sibneft made record dividend payments of US$62 million. The Duma introduced a new oil-tax regime to increase transparency and reduce tax evasion.
Russia decided to repay US$4.8 billion of its IMF debt ahead of schedule.
S&P revised its outlook on LUKOIL from stable to positive.
021009 The federal budget surplus stood at Rbl136.24bn (US$4.3bn), or 1.7% of GDP, according to Tatyana Nesterenko, Russian Deputy Finance Minister and head of the Federal Treasury's Main Department. The primary surplus totalled Rbl325.69bn, or 4.1% of GDP, in the first nine months of 2002, Nesterenko said. The nine-month budget surplus is slightly down on the 1.8% of GDP surplus recorded in the first eight months of the year. The Finance Ministry revised its forecast for the 2002 budget surplus upward from 0.53% to 0.7% of GDP last month. The budget plan for 2002 was originally designed to generate a surplus equivalent to 1.6% of GDP. However, in July the forecast was lowered to 0.53% of GDP because of problems with revenue collection and increased spending.
1024 British, US, Dutch, Australian, German and Austrian citizens are believed to be amongst some 800 hostages being held by Chechen rebels in a Moscow theatre in their most daring attack yet
021112 Russia's grey economy accounts for between 40% and 50% of GDP, according to Christof Ruhl, the chief economist at the World Bank's Russian office. In an interview with the Russian daily Kommersant, Ruhl said that the shadow economy played both a positive and a negative role in the economy. On the positive side, it helps to identify new growth areas and to create employment, but it also lowered tax revenues, as well as having a negative impact on economic indicators. Ruhl said that shadow economic activity, which is heavily concentrated in the service sector, could be reduced through a combination of tax reform and deregulation, as well as by encouraging growth in the legal sector. The World Bank's estimate of the size of Russia's shadow economy is significantly higher than the official estimate. Government estimates suggest that the grey economy accounts for between 20% and 25% of GDP.
021121 The Russian government has formally begun the process of exchanging commercial debt inherited from the Soviet era for Russian Eurobonds - a move that marks another important step in the country's transition and should boost the government's hopes of securing a ratings upgrade
021202 Sovereign risk-ratings agency Standard & Poor's has rewarded three years of prudent economic policy in Russia with a sovereign risk-rating upgrade
021212 Sergei Ignatiev, chairman of the Central Bank of Russia (CBR), said yesterday that annual inflation was likely to reach 14.5-15% in Russia by the end of the year. This is slightly higher than the government's 12-14% target for the end of the year, although it nevertheless marks a significant improvement on the 20.7% average recorded last year. Prices have risen by 13.3% year-on-year in Russia in the first 11 months of 2002, but neither the CBR nor the government appears overly concerned about the possibility that inflation may exceed target levels this year as the gap between actual and target inflation is significantly lower than in previous years.
021220 A suicide bomb attack on the headquarters of the pro-Russian government in Chechnya on 27 December resulted in the deaths of approximately 61 people, in what appears to be yet another sign that tensions in the region could ignite an internecine civil war
030117 Oleg Vyugin, the deputy governor of the Central Bank of Russia (CBR), said yesterday that the CBR is planning to reduce its reserve stock of US dollars. 'There will be more assets in euro, British pounds, other foreign currencies and in metals in the structure of the reserves,' he said. US dollars currently account for the bulk of Russia's foreign exchange reserves, but the proportion of dollars held in reserve by the CBR has already begun to decline, in tandem with the relative decline of the dollar over the past year against other major currencies. Russia's stock of gold and foreign exchange reserves stood at US$47.9bn as of 10 January, up from US$47.8bn at the beginning of the year
030210 Russian arms sales in 2002 increased to a record US$4.7bn, responding to government targets and major new deals with countries such as China and India
030218 The Finance Ministry and the Central Bank have submitted a new plan for increasing banking capital in Russia by one-third before 2007, according to the Vedomosti business daily. The strategy document forecasts that banks' role in the economy will increase from 37.6% to 45% of GDP and their capital from 5.4% to 6%-7%
030221 Lehman Brothers Bank Accused of Hiring Ex-KGB Men to Collect Debts
030307 The government is considering repaying all or part of its US$7.1bn outstanding debt to the International Monetary Fund (IMF) in a bid to cut external-debt servicing costs. The proposals are predicated on a successful medium-term outlook that posits balance of the budget by FY2005.
030312 The Russian state and Gazprom now control 54.3% of the company's equity, leading to better prospects for liberalisation and foreign investor access
030314 The Russian Finance Ministry is lobbying the government for a full opening-up of the Russian insurance market to European competitors, according to the Vedomosti business daily. The announcement will anger Russian companies, which say they are too small to compete with far larger Western companies, as well as non-European Union (EU) companies, which will say they are being discriminated against. But it could help along Russia's accession to the World Trade Organization (WTO), where it is now fiercely negotiating transition periods and exemptions for its domestic companies
030319 A Russian banking conference yesterday expressed frustration at delayed sector reforms, calling for lower costs and more protection against foreign competition
030325 The Central Bank has attempted to clarify a new currency law that has left expatriates and their employers afraid that they will not be able to transfer their salaries home via banks. The legislation, which took effect on 15 March, allows foreigners to take up to US$3,000 out of the country in cash without a declaration and up to US$10,000 with a declaration.
030404 A landmine explosion that hit a Chechen bus yesterday is now known to have killed eight people. In a separate incident six servicemen were seriously injured in a landmine blast in the capital, Grozny. The bus involved was ferrying construction workers from the main Russian military base near Grozny. The mine was hidden in a pile of rubbish, now a regular tactic used by the Chechen rebels. The blasts come less than two weeks after a referendum was held in Chechnya on a new constitution. This cements the region's status as a part of Russia and is framed as the beginning of a peace process. It is claimed 96% backed the proposal, but the rebels are clearly determined to press on with their violent struggle
030418 The assassination yesterday of Sergey Yushenkov - the leader of the new Liberal Russia party and outspoken critic of the Kremlin - signals a setback for democratic forces critical of the Russian government
030507 Russia's Health Ministry yesterday ordered local authorities bordering China and Mongolia in the country's Far East region to limit the entry of Chinese and Mongolian nationals until further notice in a bid to prevent the spread of the severe acute respiratory syndrome (SARS) epidemic to Russia. Russia has a 4,000 km border with China and tens of thousands of Chinese illegal immigrants are thought to be crossing the border each year in order to work in Russia. Cross-border trade between the two countries has boomed in recent years. Local preventative measures in Russia have been piecemeal, mainly because there does not appear to be a national strategy for coping with potential contagion
030514 Fitch has raised its Russian sovereign risk ratings from 'BB-' to 'BB+', taking the sovereign to within a single notch of investment grade
030528 The European Bank for Reconstruction and Development (EBRD) is planning to buy into Russia's foreign trade bank Vneshtorgbank (VTB), the Russian bank's vice-president Vasily Titov said. The EBRD intends to invest between US$150m and US$300m in the Russian bank, which is rated second by volume of assets in the country, according to Russia's Interfax news agency. A mandate letter signed earlier this year gives the EBRD the authority to investigate the financial condition of Vneshtorgbank and formulate the main principles for relations between future shareholders. This will probably take six to eight weeks, Titov said, noting that the EBRD and a working group representing VTB and the Russian Finance Ministry will simultaneously start drafting documents on the deal
030616 Russian deputies have voted on first reading to end a 5% sales tax and reduce VAT from 20% to 18%, with further cuts planned later
030623 The Central Bank of Russia (CBR) has lowered its refinancing rate by two percentage points to 16%. The move means that the refinancing rate is now at its lowest level in Russia's post-Soviet history. Although still high, the rate is some way below the 210% refinancing rate that operated from October 1993 to April 1994 and the 60% that remained in operation for almost a year after Russia's rouble default. The CBR has steadily chipped away at the refinancing rate since then. The refinancing rate was last cut in February, when it fell to 18% from 21%
030624 A high-profile crackdown on an organised crime ring operating inside Moscow's police force has led to over 30 arrests of senior police and security officials
030704 The EU's representative to Russia, Richard Wright, yesterday signalled his willingness to begin talks with Russian officials on moving towards a regime of visa-free travel between the European Union and Russia
030711 Russian officials yesterday rejected a request from the Chechen rebel leadership for UN intervention in the long-standing conflict to sponsor a peace settlement after two shock bombing attacks in Moscow
030721 Two former high-ranking Economy and Trade Ministry officials were convicted of bribery on Friday by the Moscow City Court - still a rare occurrence in Russia, despite the government's much-heralded commitment to rooting out bureaucratic corruption. Anatoly Lifanchikov and Vladimir Korneyev were found to have used their positions to influence decisions on providing state subsidies to agricultural producers at least 70 times. The two were also accused of accepting expensive gifts and free holidays, while Lifanchikov was charged separately with illegal possession of a firearm
030728 The scandal over embattled Russian oil giant Yukos, which has been subjected to a series of judicial investigations this month, will slow Russia's GDP growth, according to a mini-survey of leading economists conducted by the Russian business daily Vedomosti. This in turn will mean GDP growth forecasts for this year are set to be lowered and levels of capital outflows will increase. Yukos' investment programme for this year accounts for 2.6% of Russia's total, according to the survey, and likely cuts will impact on investment levels, lowering them by as much as 0.4% from an Economy Ministry forecast of 9.2%
030731 The Russian government's parliamentary watchdog has warned that legal loopholes and tax evasion are robbing the Kremlin coffers of substantial revenues. According to Audit Chamber chief Sergei Stepashin, federal budget revenues were some Rbl110bn (US$3.7bn) lighter than they could have been last year, with offshore operations (notably in the oil sector) a particular problem. However, Stepashin said that re-nationalisation (a popular subject in Russia given the continuing drama revolving around oil major Yukos) was not the answer. Instead, he advocated closing legal loopholes used by companies to avoid taxes and drastically reducing the tax burden on small and medium-sized enterprises.
030829 The European Bank for Reconstruction and Development (EBRD) announced yesterday that it had approved a US$75m loan to Russia's Transnefteprodukt, the state oil product pipeline operator, to allow the company to finance an upgrade to its pipeline network. The EBRD will act as the lender for the five-year loan, providing US$30m of its own funds as co-ordinating the US$45m that is being syndicated by three commercial European banks, Raiffeisen Zentralbank Oesterreich, Natexis Banques Populaires and Commerzbank
030909 Russian Central Bank deputy chairman Andrei Kozlov has said the bank will shortly be introducing rules requiring banks to meet capital requirements day by day. Currently, they only have to report once a month and so are able to inflate their capital artificially at the end of the month. Some capital requirements will also be cut in order to simplify the system. Kozlov also told a conference on Russian banking last week that the bank would be publishing new rules for syndicated loans in Q4 2003. He did not go into much detail, but it seems that the definition of a syndicated loan will be changed. The amount of mandatory reserves necessary would depend on the class of the loan, he added
030911 South Korea is prepared to write off US$660m of Soviet-era debt contingent of repayment of all outstanding credit owed by Moscow within 23 years, according to an official quoted by ITAR-TASS on Wednesday. Total outstanding liabilities owed by Russia to South Korea are estimated at US$2.24bn. The disputed debt forms part of a US$1.47bn loan extended by 10 private South Korean commercial banks in 1991. The remaining US$460m of the loan was paid in kind via military equipment and commodities
031003 In a further sign of improved diplomatic relations between the US and Russia, the two countries have agreed to extend an agreement on quotas for imports of US meat for a further five years, Russian Economy Minister German Gref announced yesterday
031003 The Central Bank of Russia (CBR) has said that it will consider cutting the mandatory reserve requirement for Russia's commercial banks if the move does not threaten macro-economic stability, the Moscow Times reports. At present Russian banks are obliged to hold an average of 7% of their liabilities on household rouble deposits and 10% on corporate and foreign currency deposits with the CBR interest free
031007 The European Bank for Reconstruction and Development (EBRD) is planning a ground-breaking US$150m rouble bond issue, the bank's president Jean Lemierre said in a recent interview with the UK's Financial Times. The bonds will have a maturity of three to five years in the first instance. The bank plans to follow up the initial offering with a second issue, which may have a longer maturity of up to 10 years. Lemierre stated that the purpose of the issue was not to raise money for the EBRD itself, but to 'help borrowers and investors by providing longer maturities and a smaller risk'
031008 Russian Interior Minister Boris Gryzlov, who is also the head of the pro-Kremlin United Russia bloc in the country's parliament, yesterday said the fight against money laundering in Russia is being stepped up with fresh investigations into two medium-sized banks, the Moscow Times reports. Gryzlov appeared on national television to say that Sodbiznesbank and Eurotrust are the focus of two money-laundering investigations.
031013 Russia's trade surplus rose by 30.65% year-on-year in the first eight months of 2003. At the end of August, the cumulative trade surplus stood at US$38.566bn, according to the Central Bank of Russia. This compares with US$29.519bn at the end of August 2003. On a monthly basis, August saw a trade surplus of US$5.352bn. This represents an increase of 16% from July's US$4.614bn surplus. Exports increased by 2.76% on the month in August to a record US$11.544bn. Imports were up 6.47% to US$6.192bn
031015 Japan has offered a financial package worth US$7bn in an attempt to persuade Russia to build an oil pipeline across Siberia to the Pacific port of Nakhodka instead of using a rival route to Daqing in north-eastern China, the Financial Times (FT) reports. A Japanese energy official told the FT earlier this week that Japan was proposing US$5bn to support construction of the 4,000-km pipeline that would allow the untapped reserves of Eastern Siberia to be exploited, and had added a further US$2bn for the development of Siberian oilfields, with some support in the form of low-interest loans
031032 The Russian rouble continued its appreciation against the US dollar in early trade yesterday, reaching a weighted average for tomorrow settlement of Rbl29.9319:US$1. The Russian currency had eased back to Rbl30.0179:US$1, having briefly dipped below the Rbl30:US$1 mark in early trading in the previous day's trade. Further appreciation of the rouble was only prevented by Central Bank intervention, traders told the Moscow Times
031033 Deputy Finance Minister Alexei Ulyukayev and First Deputy Chairman of the Central Bank of Russia Oleg Vyugin caused confusion yesterday over the likely direction of the Central Bank of Russia's foreign-exchange reserve holdings. Ulyukayev said that a greater proportion of CBR reserves would be held in euros in the near term - a plan that Vyugin has denied. At present, euro holdings account for 25% of the CBR's foreign-exchange reserves, with 70% held in US dollars and the remainder held in other currencies. Including gold, the Central Bank of Russia's stock of reserves stood at US$63.5bn on 10 October. President Vladimir Putin also caused a stir recently when he said that he would prefer to see Russian oil prices denominated in euros rather than US dollars, although the government has said that this is a commercial matter that Russia's oil companies must decide
031037 The arrest on Saturday of Mikhail Khodorkovsky, Russia's richest man and CEO of oil giant YukosSibneft, signals a bold step by Russian president Vladimir Putin towards embracing the statist, conservative policies of sections of his entourage
031037 According to the Central Bank of Russia (CBR), Russia's external debt increased by 4.6% in the first half of 2003 to reach US$159.1bn at the end of June. On 1 January Russia's external debt stood at US$152.1bn. Russia's debt inheritance from the Soviet Union continues to weigh heavily. Total Russian federal debt of US$93.1bn includes US$55.5bn worth of former Soviet debt, which rose by US$300m in H1, according to the CBR data. Post-Soviet federal debt was down by US$2.9bn to US$37.6bn over the period
031031 The seizure late yesterday by Russian authorities of a stake in the country's leading oil company, combined with President Putin's acceptance of the resignation of his chief of staff, sent shockwaves throughout the Russian stock market and raised red flags among foreign investors as the crisis surrounding Yukos deepened
031106 Consumer prices in Russia increased by 1% on the month in October, according to the State Statistics Committee (Goskomstat). The increase follows a 0.3% monthly rise in September and a fall of 0.4% in consumer prices in August. Consumer prices have now risen by 9.7% over the first 10 months of the year in Russia. This compares with an 11.5% increase over the same period last year, when inflation of 15.1% was recorded for the year as a whole. The relatively sharp rise in prices in October was led by a 1.1% increase in food prices, with wheat, grain and bread prices all rising sharply
031109 The State Statistics Committee yesterday reported that the cumulative value of foreign investment in Russia amounted to US$20.9bn over the first nine months of the year. The figure equates to a 61.9% increase on last year and included around US$4.67bn of foreign direct investment (FDI), which was up by 77.3% on the year
031121 The Central Bank of Russia (CBR)'s stock of gold and foreign exchange reserves leapt by US$700m in the week to 14 November to reach a new post-Soviet record of US$65.4bn. Reserves had slipped by US$200m the previous week amid fears of mass capital flight in the wake of the arrest of Yukos chief executive officer (CEO) Mikhail Khodorkovsky. However, the resurgence of reserves will help to allay (though probably not completely dispel) fears of a capital exodus
031203 The Russian Finance Ministry will make foreign debt repayments totalling US$1.415bn in December 2003. This will bring total foreign debt repayments this year to around US$17.5bn
031209 Immediately following on his party's overwhelming victory in the Russian parliamentary elections, this morning's suicide bombing in Moscow will be a tragic reminder to President Putin of the lack of a resolution to the Chechen conflict
031224 A Moscow court yesterday extended for another three months the detention of Russia's richest man and founder of the Yukos oil company Mikhail Khodorkovsky, AFP reports. This means that Khodorkovsky will remain in detention until after next year's presidential elections, which is to be held in March. His lawyers said that the charges against the former Yukos CEO, who resigned from his position after being arrested but remains head of Yukos' charitable arm, the Open Russia foundation, are politically motivated because Khodorkovsky openly financed political parties opposed to President Vladimir Putin. Khodorkovsky's prolonged pre-trial detention has divided the country's business and political establishment, with Prime Minister Mikhail Kasyanov advocating his release on bail, but security hawks in the presidential administration have supported his continued imprisonment
031230 The European Investment Bank (EIB) has agreed a 25m euro (US$31.25m) loan with the Russian authorities to finance a wastewater investment project in the northern city of St Petersburg. The EIB is the development bank of the European Union, which grants long-term loan facilities in support of EU projects. The wastewater agreement is part of a wider 100m-euro environmental project for the Baltic sea coastline
040115 Russian Diamond Monopoly Sells US$634m Worth of Diamonds to De Beers in 2003
040120 State-owned Vneshtorgbank will boost Russia's under-developed small and medium-sized enterprise (SME) sector with loans totalling US$1bn this year, bank head Andrei Kostin said after a meeting with President Vladimir Putin last week. No Russian commercial bank currently has a small-business lending programme, though there are a few banks that lend to small companies through funds provided by the European Bank for Reconstruction and Development (EBRD). In surveys small businesses consistently list bureaucracy and lack of credit as the two main obstacles to starting up in Russia. Putin has called the small business sector a top priority and has reduced some of the bureaucracy choking its development, even though this has so far had little impact. SMEs account for less than 15% of GDP, compared to 60% in the European Union
040128 Standard & Poor's (S&P) yesterday upgraded Russia's long-term foreign currency sovereign debt a notch to BB+, which is one level below investment grade. It also raised its rating for local-currency sovereign debt to BBB-/A-3, whilst affirming its B rating for short-term foreign-currency government paper.
040303 Russia's President Putin Intervenes on Grain Market to Lower Bread Price
040311 The Central Bank of Russia (CBR) is reported to have spent at least US$2bn intervening in the currency markets yesterday in order to arrest the appreciation of the rouble relative to the US dollar as the country's commercial banks unleashed dollars onto the market in anticipation that the central bank would soon end its dollar buying interventions. The bank has recently intervened at Rbl28.485:US$1 to stem the currency's rise, but signs that this cap may be raised unleashed a wave of selling. The bank subsequently re-enforced its bid price in order to stabilise the rouble
040312 A bill depriving state-owned Sberbank deposits opened after January 2005 of state guarantees could be passed by parliament in its spring session, but controversy still rages over how to approach a much-needed overhaul of the banking sector
040312 Swiss prosecutors yesterday froze US$4.9bn in cash held in bank accounts belonging to major Yukos shareholders, including its former chief executive officer (CEO) Mikhail Khodorkovsky, in an ongoing investigation into the oil giant, the Russian Prosecutor General's office said. Also among the total of 20 Russian citizens whose Swiss accounts have been blocked were Platon Lebedev, Leonid Nevzlin, Mikhail Brudno, Vladimir Duboc and Yukos vice-president Alexander Temerko. Virtually all of these were key shareholders in the Menatep holding company, which owned a large stake in Yukos. Swiss prosecutors are now apparently considering whether to charge the men with laundering illegally gained funds on Swiss territory. If the US$4.9bn figure is correct, this would be the largest amount ever blocked in a country renowned as a haven for funds belonging to the world's richest. Russian prosecutors have already frozen a 39.5% stake in Yukos shortly after Khodorkovsky's arrest in October, which they say they need as collateral for damages allegedly caused by Khodorkovsky and his associate Lebedev to the state budget
040317 The rouble weakened against the US dollar in Tuesday afternoon's trading as the weighted-average exchange rate reached Rbl28.52:US$1 for forward currency deals for Wednesday 17 March. However, the volumes in late trading were modest. The trend continued on Wednesday morning as the rate reached Rbl28.52:US$1. This rate is Rbl0.03 higher, more devaluated, than the official US dollar exchange rate set by the Central Bank for Wednesday
040325 The International Finance Corporation - the World Bank's private financing arm - yesterday signed off on a US$40m loan to Severaltransgroup, thereby making its first investment into Russia's capital-hungry rail sector, reports local daily The Moscow Times. Severaltrans is part of the Severstal Group Steel empire, and will receive this eight-year loan for upgrading rolling stock and locomotives. The company's financial director said Severaltrans plans to buy 30 new locomotives and significantly upgrade its fleet of tanker cars, both of which will be produced domestically. Oil and petroleum transportation is booming in Russia as the country's export pipeline capacity fails to cope with increased production volumes amid continued high oil prices. Last year, Severaltrans invested US$250m and budgeted the same amount for this year, including the IFC loan and a US$110m in a credit-linked note. The IFC has said it expects investments of US$500m to US$600m in Russia this year
040403 According to preliminary figures from the Russian Central Bank, the Russian current account surplus rose to US$35.91bn in 2003, which marks a substantial increase from the 2002 figure of US$32.81bn
040423 A thief walked out of the main stock market building in St Petersburg earlier this week with millions of dollars in cash and bonds after killing a security guard, police said yesterday. In what police said was probably an inside job, detectives discovered the theft of an estimated three million US dollars in cash in various currencies and bonds from three safety deposit boxes that had been broken into.
040429 Russia could disintegrate into up to 8 states, according to a CIA report forecasting events over the next decade.
040504 The Russian government is planning to increase oil export tariffs by approximately 18% as of 1 June, according to a Reuters report. Reuters cited a Finance Ministry official as saying that the duty on crude oil exports would rise from the current rate of US$35.2/tonne (US$4.80/barrel) to approximately US$41.5 to US$41.6/tonne (US$5.66 to US$5.67/b) as of the start of June. In addition, the Finance Ministry official said that the tariff on petroleum product exports would increase by the same rate, from the current level of US$31.7/tonne (US$4.32/b) to approximately US$37.3 to US$37.4/tonne (US$5.09 to US$5.10/b). The Russian Commission on Protective Measures in Foreign Trade and Customs and Tariff Policy is responsible for setting the export duty every two months in line with prices of Russia's Urals Blend crude oil
040512 Russian Diamond Major Alrosa to Issue 800m Eurobonds
040520 Sodbusinessbank, which has had its licence revoked by the Central Bank and whose management is currently trying to fight off temporary administration and a potential debt default, was involved in 'suspicious operations' worth US$1bn last year, deputy Central Bank chairman Dmitry Tulin said yesterday. The Central Bank said it will 'do all it can' to make sure depositors, who yesterday blocked the street around Sodbusinessbank's head office in Moscow, get their money back but Central Bank chairman Sergey Ignatyev said he could not guarantee that deposits will be returned. The bank is also suspected by prosecutors in Tatarstan of having participated in a payout for the 2003 murder of two KamAZ executives. The bank's management has been blacklisted from holding office in other banks, the Central Bank said yesterday.
040528 US Energy Secretary Spencer Abraham and Russian nuclear chief Alexander Rumyantsev yesterday signed a deal under which uranium fuel from dozens of Soviet-built nuclear reactors around the world will be removed and returned to Russia to prevent it from falling into terrorists' hands, Associated Press reports. Under the agreement, the US will pay some US$100m to bring both fresh and spent uranium fuel from more than 20 nuclear reactors in 17 countries back to Russia. It is part of the US$450m Global Threat Reduction Initiative aimed at securing high-risk radioactive material. Rumyantsev said the deal was an 'extremely important' part of US-Russian efforts to reduce the risks of nuclear proliferation. The return of all spent fuel is to be completed by 2010, while fresh fuel must be returned to Russia for reprocessing by the end of next year.
040610 Russian banks have moved this week to cut some credit lines to each other and interbank lending rates have jumped following the failure by two banks to make bond payments, Moscow-based investment banks told Bloomberg. Sodbusinessbank and CreditTrust missed bond payments, possibly marking the country's first bond defaults since the 1998 crisis and raising jitters about the possibility of other bank failures. Interest rates at which banks offer money to other banks for one day has jumped to 11.6%, the Central Bank said on its website. Central Bank Deputy Chairman Andrey Kozlov said Monday that the Central Bank would put money into the banking system if there were problems with liquidity
040623 According to first estimates by the Russian Economic Development and Trade Ministry, June inflation will record 0.7%, measured on the month. This monthly increase indicates an inflation rate of around 6% in the first half of 2004
040701 The latest World Bank report on the Russian economy points to strong growth, some diversification, slow implementation of legal reforms and the damaging effects of the Yukos affair
040709 In the latest indication of serious unrest in the Russian banking sector, the country's fourth largest bank, Alfa Bank, was yesterday faced with a run on its deposits. Consequently, the bank placed a 10% commission on withdrawals in a bid to protect its balance. However, it stated that its liquidity position was strong enough to deal with normal business, the surcharge is only temporary and will be abolished again as soon as the situation in the market stabilizes. Hopes of this happening were raised as it was announced that the state will step in to help Vneshtorgbank to buy Guta Bank, the last bank to run into difficulties. The Central Bank also moved to ease liquidity in the jittery interbank market on Wednesday
040709 The Russian parliament yesterday approved amendments to excise duties that will significantly raise levels of taxation, the Kommersant business daily reports. Excise taxes on cars, petroleum products, ethyl alcohol and spirits are to be raised by 8%. Beer, wine and tobacco were treated differently however, with the raise not linked to the projected rate of inflation for next year. Deputies raised excise on beer from 1.55 roubles to 1.75 roubles per litre - significantly higher than the administration had suggested. They also wanted to raise the excise tax on fortified wines sharply, from 52 roubles per litre to 95, while lowering the tax on natural wines from 2.2 roubles to 1. The vote on fortified wines went through, while the one on other wines did not. Deputies also voted on the second reading an amendment to the tax code that would shift an extra 1.5% of corporate profits tax away from regional administrations and towards the federal centre. Under the draft, VAT, excises, personal income tax, payroll tax, profit tax, mining tax, inheritance and gift taxes, customs, water tax and fees for the use of wildlife and aquatic resources are all to be collected by federal authorities. Regional budgets will be able to collect only taxes on business property, gambling taxes and transport taxes. The parliament also voted to retain the advertising tax, which the government wanted repealed.
Regulations on Foreign Investors

Restrictions: Ownership of more than 30% of a company's common shares requires a report to the Anti-Monopoly Committee.

Taxation: 15% withholding dividend tax , 0.3% stamp tax on purchasing and transferring ownership of shares, 20% withholding capital-gains tax.a6


Restrictions: According to the Foreign Investment Law.

Taxation: According to the Profit Taxation Law.a7


In early 2003 some US businessmen teamed together to ask the US president to pressure the Russian government to take action on a variety of problems they have encountered, which they say have lost them tens of millions of US dollars. The businessmen say compensation awards by the Russian commercial courts are routinely ignored by well-connected Russian businessmen or local officials. The problems include local official corruption, judicial manipulation, defiance of court rulings and a willingness to sidestep the law. Although the situation is improving under the reform-minded Putin presidency, FDI inflows are still relatively low. Russia received US$2.5bn in FDI last year, compared to Poland's US$8.8bn. Foreign investors became more upbeat, though, when BP announced a record US$6.7bn investment in the Russian oil industry, expressing confidence in the state of Russia's investment climate.

The attitude of Russia's 89 regional governments varies greatly and often depends upon the personality of the region's respective governor. The liberal political leadership of the Nizhny Novgorod region, for instance, has been highly encouraging of foreign investment, whilst the elites of other regions, say Volgograd, which is still run by an old-style Communist administration, have been hostile, particularly when it harms their own business interests. Since 1991 there have been numerous legal disputes between regional governments - or enterprises in which regional governments have an equity stake - and foreign investors, who often complain that their rights are undermined by political interference in the dispute resolution process.

millions of US dollars. The businessmen say compensation awards by the Russian commercial courts are routinely ignored by well-connected Russian businessmen or local officials. The problems include local official corruption, judicial manipulation, defiance of court rulings and a willingness to sidestep the law. Although the situation is improving under the reform-minded Putin presidency, FDI inflows are still relatively low. Russia received US$2.5bn in FDI last year, compared to Poland's US$8.8bn. Foreign investors became more upbeat, though, when BP announced a record US$6.7bn investment in the Russian oil industry, expressing confidence in the state of Russia's investment climate.

The attitude of Russia's 89 regional governments varies greatly and often depends upon the personality of the region's respective governor. The liberal political leadership of the Nizhny Novgorod region, for instance, has been highly encouraging of foreign investment, whilst the elites of other regions, say Volgograd, which is still run by an old-style Communist administration, have been hostile, particularly when it harms their own business interests. Since 1991 there have been numerous legal disputes between regional governments - or enterprises in which regional governments have an equity stake - and foreign investors, who often complain that their rights are undermined by political interference in the dispute resolution process.