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Friday, June 20, 2008

EDITORIAL: The Moscow Times and its Dirty Little Secrets


The Moscow Times and its Dirty Little Secrets

The Moscow Times is (or at least it has been) a great newspaper for those with an interest in Russia, but like all of us it has its faults.

And surely its worst is the dirty little secret it tries to keep regarding the support it receives from Russian stock brokers and its quid pro quo. Take this screen shot from the front page of the paper's website on June 17th (click it to see it full size):

Among the featured articles that day was an op-ed piece called "Russia has emerged at last" by one Stephen Jennings, CEO of "Renaissance Group." Here's a screenshot of the web page where that op-ed was found:

The attentive reader will notice that nowhere, either on the front page or on the op-ed page itself, is this article identified as what it is -- an opinion piece, arguing for a point of view. A careless reader could easily mistake it for a news report. In its new format, this is a common problem at the MT, one we've notified the paper about repeatedly -- a notice they've obviously ignored.

But we digress, because that's not the real problem. The real problem is that the MT's editors didn't require Mr. Jennings to declare his conflicts of interest.

Robert Amsterdam's blog recently reported that Russian energy companies have an advantage over European counterparts in that they don't need to obey any laws regarding the environment or fair competition, because the Russian government couldn't care less about those rules. Similarly, those who'd like to engage in the pirating of intellectual property love Russia, because copywrite laws aren't enforced there. Cigarette companies are in a similar situation.

And it's the same with stock brokers. If you say a phrase like "insider trading" to a Russian, he'll probably think you are talking about some deviant sexual practice. Russian stock brokers can play as fast and loose with the truth as they like because there's no Securities and Exchange Commission breathing down their neck. Given the fact that a Russian can easily purchase a story in a newspaper, ordered to their liking, it's hardly a consideration for a Russian stock broker to declare a conflict of interest when writing himself, as he would be required to do in a Western publication with the slightest shred of ethics.

Which brings us to Mr. Jennings and his two conflicts of interests. First of all his company Renaissance Group, unless we're very much mistaken, is an advertiser of the Moscow Times (one of a very small universe of such supporters) and for all we know it's also an investor in the paper. And likely we'll never know, because the Moscow Times never discloses this sort of thing. We wrote to the paper's editor and asked him; he ignored our message.

And second of all, Mr. Jennings earns his living convincing hapless fools to invest money in Russia. The more attractively he paints Russia's economic picture, the more money he makes. It''s just as simple as that. So, in other words, if he says things are going great in Russia, you should trust that about as far as you can throw a proud KGB spy.

Which brings us to his column, the column that doesn't say a single word about any of that and is headlined, as we've already said: "Russia has emerged at last." News flash:
We live in an age of accelerating economic convergence. The world's new economies --with Russia among the leaders -- will drive global growth and value creation in the early decades of this new century. This tectonic shift is now firmly under way, but few have taken on board the far-reaching implications. For example, the world's largest businesses will be from new world economies and the world's most influential businesspeople will be Russian, Chinese, Indian and African. New world investment funds will dwarf their Western counterparts. The dollar will become only one of many reserve currencies. Moscow, Singapore, Shanghai and Dubai, will, alongside London, be where the majority of wealth is managed and traded.
If that sounds to you suspiciously like a brochure you might get handed when you stepped into a stock broker's office for a consultation, just before you get the hard sell and he puts his hand in your pocket, it should -- because that's exactly what it is. Nothing more, and nothing less than a free sales pitch to the MT readership.

Get ready, now. Here comes another one:
Cross-border mergers and acquisitions are another indicator. According to Thomson Reuters, emerging-market mergers and acquisitions this year are up 17 percent, while they are down 43 percent in the rest of the world. Russian companies alone have been involved in cross-border mergers and acquisitions transactions totaling an about $13 billion so far this year, up fourfold over the same time last year.
Mr. Jennings forgets to tell you that (a) $13 billion is pocket change in the M&A field and (b) the only reason Russia even has that puny sum to spend is that the price of oil has spiked. This means that if you invest in Russia, you are doing nothing more than betting on the price of oil weighed against the possibility that the proud KGB spy who rules the country won't simply steal your investment (and/or throw you in jail if you're foolish enough to set foot in the country to inspect your invest).

He keeps on firing:
Companies with headquarters in the so-called high-growth countries, or HGCs, are also growing in terms of their global stature. According to a report issued by the U.S.-based Reputation Institute, 35 companies located in the four BRIC countries of Brazil, Russia, India and China are also on the institute's list of the world's most respected companies in 2008. Russian companies making the list of the top 200 include LUKoil, Gazprom, Sberbank, Magnitogorsk Iron & Steel Works, Norilsk Nickel, Evraz, Rosneft and TNK-BP.
Gazprom respected? That's odd, because on the same op-ed page Roman Kupchinsky of AZEast Group states:
On Thursday, during my testimony at a hearing of the U.S. Senate Foreign Relations Committee, I asked a rhetorical question: Did President Dmitry Medvedev, while serving as chairman of Gazprom, know that the company might have been linked to organized crime through the Swiss-based intermediary company RosUkrEnergo? I believe that he knew this but ignored it. As Gazprom's chairman, he should have known.
TNK-BP respected? Apparently, Mr. Jennings hasn't heard that BP is being robbed of its Russia assets by the Kremlin even as we speak. And it seems Jennings hasn't read the freely available annual reports by Transparency International, which routinely classify Russian business and governmental institution as among the very most corrupt on the planet. The alleged study by Reputation Institute is locked up behind a paid database and unavailable for review by anyone else. Isn't that convenient?

And then comes Jennings' final blast:
Russia's political and economic influence will only increase in the future, and the country's companies will be more important in the global economy. Moscow will grow in stature as a financial capital, becoming one of the world's top six or seven financial centers in the next decade. The nature of inward investment will also change, with increased capital coming from investors in Asia, the Middle East and otherHGCs. And, without a doubt, the quality of life for Russians -- and their economic and social freedoms -- will continue to improve. It is becoming ever more clear that the rise of the HGCs, with Russia featuring prominently, is on a scale and at a speed that dwarfs anything that has come before. We are entering a brave new world, where economies, financial institutions and private companies from emerging markets are the dominant force not only behind global growth, but also increasingly behind global business, wealth management and finance.
We challenge you, dear reader, to tell us how that statement would have been worded differently if it had been written by the Kremlin.

At the end, he slips in a coded disclaimer of course, because Westerners still might try to sue him for his ridiculous lies in some country other than Russia where stock brokers actually have to follow rules:
Of course, there are still large risks. One of the biggest risks is a global economic downturn caused by the large-scale structural adjustment being forced on developed countries. HGC economies face a painful transition, to be sure. They cannot rely on developed markets to continue to provide the growth in demand for their exports. The future growth markets will be the Of course, there are still large risks. One of the biggest risks is a global economic downturn caused by the large-scale structural adjustment being forced on developed countries. HGCHGCs themselves. The question is how quickly that transition will take place and whether it is spurred more by increased demand from new economies or a decrease from the developed countries. Another challenge is the stage of development of the HGCs' financial markets. In the near term, these markets are simply not large enough to facilitate the flood of global and domestic capital headed their way. Clearly this provides an amazing medium-term growth opportunity for the financial services industries of the HGCs. This process will involve the emergence of new localized reserve currencies and much deeper and more sophisticated local capital and banking markets. There will also be an explosion of financial flows and integration among the HGCs themselves -- the regions with the greatest savings flows and the highest investment returns in the world.
If you doubt whether he's a Russia shill, all you really need to know is that the Russia Blog - Russia Today propaganda complex is full of news about him.

There are no words to describe the foolishness of taking advice about the Russian economy from a Russian stock broker. At least, though, if the Moscow Times gave its readers a clear heads up each time it published trash like this, then the maxim caveat emptor might apply. As it is, the paper is quite simply shirking a sacred obligation to its readers by helping this stock broker pass himself off as an objective analyst.

Russian stock brokers and riverboat gamblers are the only ones willing to make such absurdly positive statements about the Russian economy. Similarly, only outcasts from the mainstream world are willing to make such statements about Russia's political system -- as recently happend for instance with Henry Kissinger and Tony Blair.

Shame on you, Moscow Times! People count on you as one of the last vestiges of actual information about Russia, and you are slowly slipping into the miasma of Russian dishonesty and intimidation. We'd hoped for better!

1 comment:

Anonymous said...

Bravo on Renaissance. Ren Cap was holding is annual investment conference in Moscow and the timing of this op ed piece was critical for the company. All major investors in Russian stock market were in town and MT splashed the news coverage of this private conference and op-ed pieces all over. It also carried full page ads from Ren Cap.
Ren Cap Chairman Yuergens is also the head of Medevedev's think tank.
As a newspaper of Moscow expats MT never reported the largest expat divorce settlement ever in Moscow. $300 million between Jennings and his ex wife Tina.