Not as surprising as February’s election in Yemen, maybe, where there was only one candidate in the presidential ballot; and not as obvious a win as any in China.
Double-counting
His victory is still mired in controversy, however, with opponents claiming Putin and his supporters ferried voters around the different polling stations allowing them to vote for him more than once.
However, even if this is true, it is unlikely to lead to any change in power and Putin and Dmitry Medvedev as prime minister will be the figures at the head of Russia for years to come.
Political risk is always a negative when describing many of the non-democratic countries yet this is lessening in Russia’s case. If his rhetoric about getting even tougher on corruption is followed up by actions then Russia may even be a better place to do business corporately as well.
We have written a great deal about Russia and the other BRIC countries over the past months, and about Russia lying fourth on a list of four when it comes to their relative economic growth. From an equity investor’s point of view all the individual, and combined, MSIC BRIC indices have made negative returns in the past 12 months, but Russia is head and shoulders above the others when it comes to three-year returns.
Where the MSCI BRIC Index return for the three years to 27 February, 2012, is 203%, the MSCI Russia Index tops the tree at 252.3%.
Decade of change to come
Like Putin or not, like the Russian election process or not, having him in power could actually see the pace of economic reform increase. Infrastructure spend, greater privatisation and less State-reliance are all on the cards and with Putin now in for a minimum of six years, with the possibility of a second term to follow, Russia could well change beyond recognition.
On corporate Russia, Charles Robertson, global chief economist at Renaissance Capital says: “If Rosneft traded at a similar P/E ratio to Statoil of Norway, its market capitalisation would rise from $80bn to $120bn, and the planned privatisation proceeds from this company alone would be $18bn, instead of $12bn, on our estimates.
“If a similar situation was seen across the board, the government’s ability to fund Putin’s spending plans would be greatly enhanced.”
As long as Putin remains popular and in power – and as long as he has the oil and natural gas resources to remain popular and in power – the West needs to adapt to him being around for the next decade, like him or not.
