From Russia, With Fear

by Sara Nunnally Published on Monday, 02 April 2012, Inside Investing Daily

The BRICs are starting to show their power. As tensions with Iran rise, their economic fate is at risk.

When Russia’s worried, we all should be worried…   And when that worry concerns Iran and its nuclear program, it’s even scarier. Let me throw out a few words and phrases that Russian Deputy Foreign Minister Sergei Ryabkov said in an interview on Friday:

• Alarming
• Expanding
• Violation
• A new global economic crisis
• Strikes against Iran by… Israel
• An explosion of energy prices
• Escalation
• Worse than last year

Iran Feeling the Pressure

Economic sanctions are starting to have an effect on Iran. Reuters reports that the country has defaulted on its payments for rice to India.

Iranian buyers have defaulted on payments for about 200,000 tonnes of rice from their top supplier India, exporters and rice millers said on Tuesday, a sign of the mounting pressure on Tehran from a new wave of Western sanctions.

Now Iran can’t buy Indian rice on credit.

Now, This Is Interesting…

MarketWatch.com’s Polya Lesova reporting from Davos, Switzerland:

The $10 billion Russia Direct Investment Fund plans to announce three deals in the next month, the chief executive of the Russian government’s private-equity vehicle told MarketWatch in an interview on the sidelines of the World Economic Forum’s annual meeting.

The deals will be the first for the fund, which was created in June 2011 and will be capitalized with $10 billion from the Russian government over the next five years. It’s mandated to co-invest with international investors in an effort to attract investment to Russia.

The main industries that this fund will be focused on are financial services, logistics, healthcare, electrical utilities and agriculture. We think something’s missing from this list… and that’s a shame.

The fund is expected to be involved in 15 deals over the next three years, and we hope more than one of those deals finds its way into the energy and infrastructure arena – not just electrical utilities. There are some major deficiencies in this sector that could really hamper growth.

Here’s an article I published right around the holidays on the subject.

The Growth Map

I’ve just started reading Jim O’Neill’s new book, The Growth Map: Economic Opportunity in the BRICs and Beyond.

This guy’s most known for coining the term BRIC for the grouping of Brazil, Russia, India and China. It’s been an investor’s boon for the past ten years, and everyone thought he was crazy at first. This new book highlights eleven new countries that are about to hit center stage.

The Growth Map has already got me hooked… From Page 5:

China’s Energy Shortage

China’s growing faster than its infrastructure can keep up… especially its power system. Here’s an article I wrote back in July detailing just how bad the situation is getting.

And where there’s a crisis, there’s also an opportunity. Read on…

Lights Out — The Opportunity in a China Blackout

You’ve got a perfect hand at the blackjack table… and you’ve got a lot of patacas in your bet pile.

The night’s been lucky for you at the Lisboa Macau, and you’ve got an upgrade coming your way if your luck holds out. The dealer’s showing 15, then 19, then bust! Looks like you’ll be smiling all the way to your luxury suite.

The dealer’s counting your winnings when the Lisboa suddenly goes dark…

VISTAs not BRICs?

When people were first introduced to emerging markets on a large scale, some of the most promising countries for investors were Brazil, Russia, India, and China – or BRIC nations.

With China looking like it’s topping out, rampant inflation in Brazil, and underperformance in Russia and some could argue India, are BRICs where investors should still be putting their emerging market money? Maybe not, though I would say I still like India of the four.

Interestingly, some analysts are starting to lump South Africa in with the BRICs

Well, I travelled to South Africa a few years ago, and got to sit with a businessman (and VIP subscriber) to talk about the South African economy and why he just sold his business to an Indian company. The S.A. rand was killing exports – plain and simple – and the government wasn’t doing much about it.

The government wasn’t doing much about the infrastructure and power needs, either, or the soaring unemployment. Official statistics had put unemployment at between 16% and 20%, but unofficially that figure could be as high as 40%.

Vladimir Putin: He’s Baaaaack…

I read an article the other day that confirmed an old suspicion.

Vladimir Putin will be running for president again in the Russian 2012 race. I knew he was biding his time as prime minister, just waiting until he could legally climb back onto his throne.

He’s a shoe-in, because Medvedev has said he will forgo a second term to let Vladimir Putin into office.

And get this… When he comes back into power, the presidential terms will increase from two four-year terms to two six-year terms. VladimirPutin could be Russia’s next president until 2024!

Guess where Medvedev is headed? Straight to the prime minister’s office… following a congressional “vote,” of course.

So what does this mean for Russia — at least from the point of view of you as an investor?