In October 2015 Richard Quest from CNN talking to a group of approximately 500 investors and executives, he wanted to know their opinion about the timing of the abolition of the Russian sanctions. They participated in a televised discussion at the annual conference of Russian investors VTB Capital under the name “Russia calling!”. Options if I remember correctly, were: six months, year, two years, permanent. The vast majority chose the option “permanent”.
That says a lot. The market absolutely correctly understood it. The sanctions continue for the third year. It also shows that the market is not worried by the sanctions. As I said this week, one Fund Manager at a large American investment Bank with money in Russia: “We don’t care about politics. Forget about the sanctions. We look at other things.” Forget about the sanctions. President Donald trump is under pressure from a small but strong Democratic party, the Republicans and supporters a very tough course in the defense and intelligence communities in Washington. They strive to keep this conversation on the discharge [of relations] with Russia. Obama tried. And it did not work. Trump is also trying, and the whole town pounces on him before speaking with a Russian or any business with them.
To trump’s pressure, he distanced himself from Vladimir Putin. Any move to reduce sanctions, which expire in December, will be deemed to be evidence that trump conspired with the Kremlin. The Daily Beast, MSNBC, CNN, NYT and The Washington Post will be looking for evidence of money transfer to the accounts of trump and his partners to any Bank account in the Caribbean. An unnamed official (from the same group that throws new daily press headlines about Russia) to present “evidence”. The head of the National economic Council the White house Gary Cohn said, “We will not cancel sanctions against Russia. We can consider tightening,” — said in a Friday newspaper “Kommersant”, putting the source of Agence France Presse.
During his meetings with Italian leaders Sergio Mattarella and Paolo Gentiloni, trump confirmed the continued commitment of Washington to hold Russia accountable for its actions in Crimea and Eastern Ukraine. The U.S. state Department, led a “friend of Putin”, which we were warned back in December, said that sanctions will remain in place as long as Russia does not begin to comply with the Minsk agreement. This agreement based on a cease-fire between the military and Pro-Russian rebels in Ukraine, fighting in Ukraine’s Eastern regions such as Donetsk and Lugansk, depends on Russian military support and assistance in the conduct of the election from the Ukrainian side. Elections, most likely, will lead to the emergence of regional Pro-Russian Autonomous government, which Kiev does not want.
Its South-Eastern Crimean Peninsula was an Autonomous region, which voted for secession in March 2014. The official position of the United States, Europe, and the United Nations lies in the fact that the vote was a fraud. Surveys conducted at the time, Western firms Gallup, Pew and GfK from Germany, showed that the majority of inhabitants of Crimea voted for secession and annexation to Russia. Russia claims that this is why she seized the territory. The West claims that Russia annexed it illegally. The return of Crimea to Ukraine is not part of the Minsk agreement, regardless of the complex debate.
This week in new York, I talked about Russia and Europe, with investors from London. I showed him the bars on the roof, with views of the Freedom Tower in Chelsea. He told me what he thinks about the lifting of sanctions. As we spoke informally, his name will not be disclosed. He said that watching for signs of discharge coming from the Emmanuel Macron, and thinks that trump and Putin will get along when, in the end, will meet.
Many in France are unhappy with the sanctions. In April, the lower house of the French Parliament considered a resolution against sanctions. The period of EU sanctions expire this summer. The resolution was supported by 577 deputies, only about 50 were in favour of their renewal. It is not binding, but it shows us the possible developments.
Why macron and France?
In addition to Turkey, Russia has two allies in the middle East. But only one of material importance to France. And it is Iran. French oil giant “Total SA” invested funds ever since Obama lifted the sanctions. The macron doesn’t want problems with Iran will side with Russia. If macron can get Russia to talk to Bashar al-Assad, there is a chance that Assad will be asked to leave, and we get a peaceful regime change, blessed, maybe, with all my heart, Washington and the Kremlin. Suddenly, Russia ceases to be a bad guy. Sanctions lifted, because everyone understands that even if Russia will not send a single bullet or a loaf of bread in Donetsk, Minsk agreement cannot be implemented without the consent of Kiev in the elections.
Perhaps investors will want to watch the secret handshake (just kidding) between Putin and trump during the G-20 meeting in June this year. It was there that the two leaders will meet for the first time, and then we can hear the official word of the President on sanctions.
Even assuming that they will remain forever, wall street still isn’t worried. U.S. investors and investment banks do business with the Russians. Including those mentioned in headlines about a former campaign adviser to trump the Field Manaforce. Billionaire Forbes, Oleg Deripaska allegedly hired Citibank to run the first public offering of shares of its “En + Group” on the London stock exchange.
Russia has been a good performer for American managers, it is well proved on the market in 2016.
“Even if you ignore such things as political risk, Russia is a good market,” says James Donald, Manager of the Fund, the “Lazard Emerging Markets Equity” (LZEMX) and head of emerging markets at Lazard Asset Management in new York. “I think this year she can once again show good results.”
