November 22, 2024

You are here: Home / Archives for oil wealth

Foreign Automakers See Potential in Russian Market

December 25, 2012 by Leave a Comment

Even as G.M. is scaling back elsewhere in Europe, the company is ramping up production in Russia, a country that is becoming a bright spot for G.M. and much of the rest of the automotive industry.

Trickle-down oil wealth and the spread of easily accessible auto financing are lifting sales, which rose by 40 percent in the first half of this year compared with the same period a year ago. G.M., Ford, Volkswagen, Nissan and Renault are all opening new plants, or intend to do so soon.

The new G.M. line in this picturesque town, an old center of the Russian car industry on the Volga River, will manufacture 30,000 Aveo sedans a year. Cars, held up on jacks, move along the assembly line and end up in a brilliantly illuminated inspection room, where every inch is carefully examined; the factory is trying to get defects down to G.M. standards. If all goes well, production will start in January.

The site is one of half a dozen facilities that G.M. runs in Russia, where the Detroit carmaker intends to invest $1 billion over the next five years. The money is a good bet today, analysts of the Russian market say, for the same reason that politics here recently got a jolt with street protests: the Russian middle class is rising, and becoming a force in both commerce and public life.

“I would put Russia in the same breath as China,” Timothy E. Lee, the head of G.M.’s international division, said at a groundbreaking ceremony for a plant in St. Petersburg last summer, which will make midprice sedans.

Russians are snatching up foreign-branded cars. The Hyundai Solaris was the best-selling vehicle in Russia last year. And Hyundai, Nissan and Renault all did well in the first 11 months of this year, with sales increases ranging from 11 to 23 percent.

Over all, Russian sales are now approaching three million cars annually, according to the Association of European Businesses, a group that tracks sales here as part of its efforts to promote trade between Russia and the European Union.

Russia is projected to surpass Germany and become the largest car market in Europe in 2014. It is already nipping at Germany’s lead. In August, Russians bought more cars than Germans did, before sales tapered off in the fall.

International car companies say the best way to benefit from the growth is through investing heavily in Russian manufacturing, elbowing aside local brands.

Russia’s automobile industry survived the financial crisis not through subsidies, though these were handed out, but through a willingness to embrace foreign manufacturers — even if that hurt homegrown brands like the Lada and the Volga, the model once made in the plant here.

Russians have shown little nostalgia for their own cars.

“I’m glad they’re gone,” said Nikolai Chernyshov, a 34-year-old lawyer, as his family spilled out of a Ford Focus at a shopping center. He has not shed a tear, he said, for the Lada he once drove.

“No matter what effort we put into making them better, they never got any better,” he said.

The Volga, an overpowered slab of steel, was once the vehicle of choice for K.G.B. agents. It even had an ominous nickname, the Black Raven. But the cars often broke down, diminishing their cachet.

Last year, the last Volga rolled out of the Gorky Automobile Factory, clearing enough floor space for three foreign manufacturers — G.M., Volkswagen and Mercedes — which collectively now employ about 5,000 people.

“We are only helped by being brutally honest with ourselves,” said Bo Andersson, a former G.M. executive hired in 2009 to manage the transition.

“It’s a shame we lost the Volga,” Aleksandr Kazanin, a worker here, said. “But we’re still here. We kept our jobs.”

Avtovaz, the maker of Russia’s other main brand, the Lada, is also charting a future based on a strategy of forming joint ventures with foreign car companies — in its case, Nissan of Japan and Renault of France.

Just this month, the French-Japanese alliance formalized an agreement to buy a controlling stake in Avtovaz from the Russian government, bringing all of the country’s car industry under foreign management or ownership for the first time in the post-Soviet period.

Article source: http://www.nytimes.com/2012/12/26/business/global/foreign-automakers-see-potential-in-russian-market.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Prices and Anger Rise in Nigeria, Presaging More Strikes

January 16, 2012 by Leave a Comment

The price of onions has more than doubled because of the cost of getting them to market. Dried crawfish, hot peppers and watermelon seed are twice as expensive. Lines of cars stretch far down dingy blocks in the gray winter haze, waiting to pay about $3.50 a gallon for gasoline that cost just $1.70 on New Year’s Eve.

The standoff among the Nigerian government, the labor unions and the street continued Sunday, with vows of more strikes and protests on Monday unless the government backs down and brings back cheaper gasoline.

At the grimy Iddo Market in Lagos, a long line of rickety open stalls under a highway overpass, the mood over the weekend was wary. Housewives bustled about the piles of yams and tomatoes for the first time in a week.

“Everything is just double, triple the price,” said Segun Nisi, shaking her head over the cost of watermelon seeds, whose oil is used in cooking here. Similar reactions boded ill for the government’s policy course.

Nigeria produces immense oil wealth, but analysts say that for decades, billions of dollars from the country’s oil earnings have been stolen by a corrupt elite while three-quarters of the country’s citizens live on about a dollar a day. Government-subsidized gasoline has been almost the only benefit from oil production to reach the wider population.

Citing a desire to put public finances on a sounder footing, the government revoked the fuel subsidy on Jan. 1, a step that filled the streets of Nigerian cities with tens of thousands of protesters all last week. The police used live ammunition to disperse protests in Kano and other places; at least three people were killed, and Amnesty International denounced what it said was excessive use of force by the authorities.

Some local commentators saw the protests as the beginning of a “Nigerian Spring.” But they were another headache for a country that is already faced with an insurrection by armed Islamic militants in the north, sectarian tensions in the middle and perpetual restiveness in the oil-producing south. At Iddo, Mrs. Nisi was dressed up for shopping — a shiny white blouse, embroidered black cap — after a week of closed stores and markets. But the experience was not making her sympathetic to the government’s plan. And the seed vendor was not budging from his new price. “We are just suffering here, and the people at the top are enjoying their life,” Mrs. Nisi said. “They are just making people too crazy.”

Even the country’s oil workers are now threatening to strike, which could affect world energy markets if the country’s exports are crimped. One analyst said a strike lasting several weeks could push up oil prices by $10 to $20 a barrel.

At the root of the trouble is a paradox that some see as emblematic of the country’s 50 years of independence: Nigeria is one of the world’s leading crude oil exporters, but it must import nearly all of its gasoline from foreign refineries because years of neglect, mismanagement and corruption have left the country’s own refineries unable to function. The government subsidies, which approached $8 billion, made up the difference between the world market price and the lower price that Nigerians had been paying at the pump, while the middlemen who imported the gasoline made huge profits.

In a 2009 report, the International Monetary Fund called the removal of the fuel subsidy “an important first step.” But in a place where experts estimate that $50 billion to $100 billion in oil revenue has been lost through fraud and that 80 percent of the economic benefit from oil production has flowed to 1 percent of the population, the monetary fund’s approval of a step that hits ordinary people so hard looks provocative.

At Iddo, Mabel Ekewke eyed five small baskets of onions. Before, they would have cost about 1,000 nairas (about $6.25), she said; now the vendor was asking 2,500 nairas ($15.50).

Article source: http://www.nytimes.com/2012/01/16/world/africa/prices-and-anger-rise-in-nigeria-presaging-more-strikes.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Russian Site Smokes Out Corruption

March 28, 2011 by Leave a Comment

But in today’s Russia, Aleksei N. Navalny has managed to attract a vast audience with his Web site for investors, Navalny.ru, even as he takes on big state-owned energy companies in his crusade against graft, kickbacks and bribery.

A 34-year-old real estate lawyer by training, Mr. Navalny can reach as many as a million unique visitors in a day with his digital samizdat, as happened last fall with his scoop about embezzlement at Transneft, a state-run pipeline company.

That scheme, presented as a cautionary tale for those tempted to invest in Russian energy stocks, described executives setting up a series of shell companies to pose as contractors for Transneft’s project to build a 3,000-mile pipeline to China. One shell, for example, was registered in the name of a Siberian man who had lost his passport, according to the Nalvany report.

The post included an audit indicating that the contracting fraud had cost Transneft $4 billion. Both Transneft and the government accounting office, whose documents Mr. Navalny said he leaked on his site, have denied the corruption claim.

But Prime Minister Vladimir V. Putin took the posting seriously enough to ask for an investigation, which is still pending.

Mr. Navalny, whose fame and unabashed political ambitions are surely helped by his blue-eyed good looks and acidic sense of humor, has clearly touched a nerve in Russian society. His blog appeals to Russians who wonder: if the country’s vast oil wealth is not trickling down to the public, where is it going?

“I do this because I hate these people,” Mr. Navalny said gleefully of his Web postings, which take aim at those he describes as the self-dealing managers in the oil and natural gas business.

Within Russia, Mr. Navalny’s celebrity “is growing almost as quickly as that of WikiLeaks founder Julian Assange,” Nikolai Petrov, a fellow at the Carnegie Moscow Center, a political affairs research group, wrote in December. Mr. Petrov wrote that Mr. Navalny “represents a new generation of political activists, one who sees the system’s vulnerabilities and targets his blows accordingly.”

A former activist in a liberal political party, Yabloko, Mr. Navalny says he will eventually run for public office. He now calls himself an advocate of the rights of members of the Russian middle class — people who have invested in the stock market and who he says are losing money to corruption and mismanagement.

Stock ownership here is tiny by the standards of the United States. Russians have opened 726,000 brokerage accounts, representing about 0.5 percent of the population.

But that number, and Mr. Navalny’s likely audience, is growing about 12 percent a month, according to Troika Dialog, a Moscow investment bank. Just as Americans seethed at wealthy bankers after the housing bubble burst, he said, Russians have started chafing at state company mismanagement during the oil boom.

“They see that Gazprom does not pay a dividend,” he said, “but the company parking lot is full of Mercedes-Benz cars.”

While potentially valuable to the owners of stocks and mutual funds, Mr. Navalny’s disclosures are not winning him friends in the executive suites of the country’s big energy companies.

The chief executive of Transneft, Nikolai Tokarev, a veteran of the Soviet K.G.B., has suggested that Mr. Navalny is a shill for the Central Intelligence Agency, ordered to smear the reputations of important Russian companies.

Nothing has followed from these charges so far. Mr. Navalny, though, became so unnerved that he gave his wife a list of phone numbers to call if he disappeared — other lawyers, journalists and opposition politicians.

“They could arrest me at any moment,” Mr. Navalny explained.

Indeed, after the Transneft documents were published, the government opened a criminal investigation against Mr. Navalny. It nominally has nothing to do with his Transneft disclosures. Instead, it involves his supposedly giving bad investment advice to a regional government several years ago, when he worked as an adviser to a local governor. That investigation, too, is still pending.

After the pipeline audit leak, men who identified themselves as security agents contacted clients of Mr. Navalny’s law practice, warning them against doing business with him, Mr. Navalny said.

Mr. Navalny has held down his day job as a real estate lawyer alongside his prolific online writing. He got his start in 2007 by suing Russian companies to force disclosure of accounting documents, using his standing as a minority stockholder owning a few shares. He would then publish the disclosures on a LiveJournal blog, eventually building up a following. He started Navalny.ru last year.

He has fans among Moscow financial analysts and bankers, in particular.

Article source: http://feeds.nytimes.com/click.phdo?i=29234d317beb22a7c052ca93787d4630

Filed Under: Business News Tagged With: , ,