COMMENT: Is Ivanov now the clear Russian presidential frontrunner?

By bne IntelliNews June 20, 2007

UBS Investment Bank in Moscow -

Sergei Ivanov, first deputy prime minister along with Dmitry Medvedev, opened the St Petersburg Economic Forum on June 8 with a keynote speech, held a big news conference, talked to international CEOs and appeared to gain the backing of Medvedev himself.

Talking to CEOs and the press before a closed-door meeting with the former, Medvedev said: "Suggestions made in the speech of First Deputy PM Sergei Ivanov seem to me a continuation of the line which has proved itself well in the last few years." Medvedev neither gave a press conference nor made a major keynote speech at the Forum.

Tea-leaf reading, but this supports the consensus view in Moscow currently that Ivanov has moved clearly in front of Medvedev in the (presumed) race between the two for the presidency. Clarity on this issue we see as critical for the stock market’s performance. We think that this weekend in St Petersburg will have, however marginally, helped in this regard, particularly given his speech on the economic direction of the country he perceives.

Ivanov lays out his agenda

The key elements of Ivanov's keynote speech were as follows:

-- "The Russian people have made their historical choice for democracy, openness and the freedom of society and business initiatives. This is a foundation that cannot undergo revision. This is the main orientation of our strategy."

-- His aim was for Russia to be amongst the top-five world economies by GDP in 2020.

-- He said that both foreign investors and the state would play key roles in the economy’s development

-- Russia would seek to boost sectors such as nuclear energy, aviation, shipbuilding, defence and space with state intervention/ownership, while trying to increase processing capacity for its resources.

-- Ivanov said the point of these being state owned was not to have nationalized monopolies but to have public (IPO-ed) corporations that will be able to compete in international markets, and can cooperate with private and foreign companies.

-- He railed against corruption, said that state officials had failed to create the proper conditions for small and medium-sized enterprises, and that there was insufficient state support for innovation.

-- He said that they had to learn to use their natural resources and natural competitive advantages more effectively.

Additionally, Ivanov met with international CEOs in a closed-door meeting. Little was said by these CEOs afterwards over the contents of the meeting, but executives quoted in the press said Ivanov spoke in fluent English throughout the meeting. One participant, who also attended a similar session with the other first deputy PM Medvedev, said of the two meetings: "They are different individuals ... they were both equally open, candid, articulate and honest."

As Medvedev noted, Ivanov's speech represents a continuation of current policy. Nonetheless, it is good to hear exactly this, articulated coherently, and including the explicit ambition of make Russia the fifth biggest world economy by 2020. That goal is ambitious: in 2008 we see it being the 8th largest (just pipping Spain to that position), but to get to fifth it will need to jostle with India and challenge Germany (currently India lies slightly behind Russia, while Germany is three times as big); it is hard to see the first three not being US, China, Japan in 2020.

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