Reuters - Video

Edition: US | UK | IN | CN | JP

Video

Putin's Russia faces economic challenges

Thursday, April 05, 2012 - 02:51

April 5 - A top analyst tells Reuters the Russia's fortunes under a second Vladimir Putin presidency could mirror those of the Chelsea Football Club, which is owned by prominent Russian oligarch Roman Abrambovich. Kiryl Sukhotski reports

▲ Hide Transcript

View Transcript

Chelsea football club is struggling to find form this season and return to its former glory - similarly, the Russian economy is struggling to find new drivers for growth. Chelsea club owner Roman Abramovich himself plays an important role in the Russian economy and the challenges Russia and Chelsea face may be compared, says Mert Yidliz, a top economist at Russia's biggest private investment bank Renaissance Capital. SOUNDBITE: MERT YIDLIZ, ECONOMIST, RENAISSANCE CAPITAL INVESTMENT BANK, SAYING (English): "Looking at Chelsea, I mean, you see a declining performance, especially this year unfortunately. It's an on-and-off performance. It's a very quick change in managers, a very quick turnover of players. And all this is sustained through Abramovich's money. He can easily throw money at the club and make sure they perform relatively well. And it kind of compares to Russia because the oil revenues in Russia mask a lot of deficiencies in the economy." Russia is the world's biggest energy producer and is heavily dependent on oil, gas and metals exports. Citigroup analysts believe the commodities supercycle is about to end and prices will fall. So for Russia to prosper it cannot rely on oil anymore, just as Chelsea can no longer rely only on its old guard to win trophies. SOUNDBITE: MERT YIDLIZ, ECONOMIST, RENAISSANCE CAPITAL INVESTMENT BANK, SAYING (English): "We do see some very old players in the Russian politics, and we do see some old players in Chelsea. Players, I don't mean footballers, I mean managers. The difference is that with the new (Vladimir) Putin governement we are expecting a change in the management. And if that is delivered, that's actually the first step forward. That kind of shows Putin's will to say: look, we are willing to change things." Vladimir Putin, who will return to presidency next month, will need to diversify the economy and calm investors down. Some big companies, especially in the car sector and the food business, have already made big investments in Russia. But others are more nervous, and capital outflows from Russia unusually surged last year to 84 billion dollars. To bring in new money, Putin needs to show that Russia will change. SOUNDBITE: MERT YIDLIZ, ECONOMIST, RENAISSANCE CAPITAL INVESTMENT BANK, SAYING (English): "Simply because there are so many of oil revenues, it delays and it reduces the need for infrastructure reforms. But again, I do think that oil revenues will start to decline and at this point Russia needs to do some reforms. I don't know if Chelsea can deliver that." But if oil prices fall and Chelsea fail to qualify for the Champions League next year, the need for reform both in Russia and at Chelsea will be equally urgent. Kiryl Sukhotski, Reuters

Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code

Putin's Russia faces economic challenges

Thursday, April 05, 2012 - 02:51