Nationalist fever contradict need for foreign investment

Published: 3/17/2000

According to Mikhail Simonov, General Designer of Sukhoi, US investors own 4% of joint stock company, through US-controlled Russian corporate vehicles. Simonov considers that, while this situation is currently benign, US investors will continue to acquire stock with the aim of influencing the Russian military export market. He claims that this could have a negative impact in situations where Sukhoi is in direct competition with the USA. This is characteristic American-bashing, which is typical of the election season. The use of paranoia to underline the nationalist message at such a time is a tactic that Simonov employs with some relish, in order to protect and promote the military-industrial sector. The investors concerned are primarily US institutional investors, whose goal is a high return. An objective is rarely realized in this sector. The key problems for those involved in funding the Russian aerospace industry, is not fighting off prospective investors, but the difficulty of attracting investment in the first place and in preventing the outflow of funds already committed to the sector. One major US investor has reportedly been hawking its portfolio of aerospace companies around the market for the last twelve months, with no takers, despite the increasing optimistic outlook of Russian brokers on the sector and the stock being offered at lower prices. Others have been left with large holdings in illiquid stocks that have ceased to trade. There are industrial shareholders in the sector, but most of the deals have largely been orchestrated by the respective parties to cement relations, such as Sikorsky at Mil, rather than being acquired in a 'hostile ' manner with the intention of gaining influence or control by stealth. Simonov is however, right to be concerned on one level, foreign shareholders will be a great deal less tolerant than the government, of what they see as poor management and a lack of a viable strategy.

Article ID: 1696