to my. mind old. history. about here where these are the top stories israelis and palestinians are urged to return to negotiations table as the middle east quartet lays down a vision is new goals arrived in the mansour moment of palestinian statehood bid as the new arab. education stagnation shop is bigger is revealed one in five british youngsters leave school without basic literacy and are struggling to find jobs as a result. russia is only party holds its annual conference as speculation mounts over whether this could be the place and a time to announce who will stand for the presidency in two thousand and twelve.

and market meltdown is the worst rating we can you are and the us is the crisis of two thousand and eight see years of a double dip recession grow despite the efforts of the i.m.f. and world bank but also the headlines up next get out as guests discuss the role of russia and other emerging economies in tackling the unstable global financial situation on the market is next in our city. welcome to on the money where the business of russia is business with the privatization of key state controlled sectors of vital part of the government's long term economic strategy on the money looks at the company's schedule to be part of the program it's time frames expectations as well as potential budgetary implications along with the risks involved in pushing privatization in russia with the global economy looking weak.

discuss russia's upcoming privatization i'm joined by so goldman in the studio with me he is the c.e.o. of the joint star company dining world also i have been here and he's the editor in chief of business new europe and we also have tom when he's the chief strategist a quitter but first let's have an overview of russia's privatization goals. the multi-billion dollar privatization plan will see the russian government sell down its current fifty five percent ownership stake in the economy it could object to well beyond the budget bottom line they mean. in my view. or the government is not the. manager. of. the garm. diversify the structure.

it is a bit with boy. every . other and throughout target is definitely more than ization. corporate governance procedures. so once. wrote a novel. international investors international with the progress it's impossible to meet. everyone. just wants them to do the deteriorating google has some questioning whether she. should be doing it there's not. nice. beaches in the market at the same time however the global search for investment value means the russian that's coming to the blog could distract greater interest regardless of the timing

the privatization plan would trade interest. the company simple question thank you for taking the measure of my and that means the state to give me a long time for this. time volatility. for on the money. ok gentlemen when we were planning this program there was volatility in the market but if we sit down right now there is enormous volatility in the market right now and we're talking about what's going on in the emerging markets right now the stock markets ben how much sense does it make to talk about privatization and russia's privatization program which is a vast right now i mean we're going to we're going to have to delay it even longer or is it a wait and see i mean there's so many things being played out there is carnage in the markets right now what are the russians going to do well i talked to and i said about a run in the agency that's coordinating the whole program and he said to me the top priority is to get the states out of the economy is a question of long term competitiveness of the states

a bad manager and encouraging the kremlin concedes that as a they want to remove themselves however you know there's a succession of money involved so these are big valuable companies and so the balance. they want to sell they need to sell to get them out of get them into private hands or at least part of the site but any price and clearly the market is extremely unstable and. the russian stock markets must at least a quarter of its value since august and so it doesn't really make sense to sell them so much as you don't need to you can wait here and then the prices will go back up and we're talking billions and billions i mean it's very interesting as we look at so many of these countries in the euro zone if i go to sergey on this is that we have to sell assets because they needed for their budget because of the deficit to run up russia doesn't have to sell assets right now stayed on i felt it would like to because as ben pointed out in principle once they get the economy out i'm sure get the government out of the economy so russia has a little bit of

a luxury situation right now compared to a lot of its appears in the world. feinted we are in such situation when we can afford ourselves wisely handle the days resources very very important the resources for the national economy and very serious but his opponents of the. pros those on the world scale i would agree wise words from which were about the goals of privatization will under a lot from big crisis of the year has been and seeks. to sell than and night but we didn't do everything we learned as the lessons of this. pierrette it's time to challenge another difficult times another crisis and. i don't mean to overestimate the role of the business but it's very evident that business

can play a significant role when we believe that we if we look at it we're going to tom here i mean tom if we're if we're looking at you know should they or shouldn't they i mean it's just a matter of time right now what would what do you investors looking at now i would be looking at specific sectors we have some we have like spare bank up there we have al rosen i mean what do you think during this time of volatility and considering the privatization program is it going to be sector driven. well i think you know i agree with what the fed analysts i mean clearly the market people are really looking at privatization program nobody actually expects anything material to happen in the near future certainly not so well and six thousand and twelve i mean the only name it could really come to the market in any in any meaningful size . and their futures that i believe in that's going to get pushed back and i think i do you know i will say for right. now there is a precipice like that moments and you know it's which which political cycle right or of us is that. this is

a russia's political i mean i think there's a history of privatization and russia not going to be popular in most places i don't think given especially given the current market but it's ensuite prices depressed as they are and there's any need of saw any real willingness to push these privatizations out before the next for the next election and i think the market really does accept that what's more interesting i think is the way that the government has attacked has understood the need for an investment and instead of pushing privatization aggressively in the current market volatility they've looked at j.v. and getting davies going for a sense of russia like the x. on the us the f.t. oh that's mine my much more it's that much more substantial and something of foreign investment community can really latch on to propositions and it's very it's not going to be front and center for a little while yet but it's very very if i go back to ben here i think it's very interesting i think we should point out to our viewers what privatization means for this country because as i pointed out to sergei we have countries in the years on that have to sell assets because we need to generate income for the budget russia

doesn't have to deal with the other things like expertise more liquidity in the marketplace to attract even more investment in russia has a different objective or a series of camps if you western europe or the states even though many people a certain percentage money and russia has the luxury of having lots of money it's the third richest country in the world in terms of cash in the bank they can cover their extent of the public so that the. he sort of have a lot of cash so the goal of this protestation is dealing with russia's more basic problems which is competitiveness efficiency new technologies and this thing of companies in the strategic sectors have been put off and said again having ring fence personal crisis and then looking for know how for management skills for technology for efficiency to boost productivity competitiveness and this is the irony of russia has lots of money but it's not particularly competitive and going forward you need to have

a viable economy you need to compete you need to produce goods that you can sell you know signifying or you i mean i think we all agree with what we just heard from tom i mean it is because of the volatility going on right now and the election cycle in russia and in the united states. there's going to be a wait and see we you know there are thirty meet names brand names of the nine hundred companies there's eight hundred seventy small ones there i mean is it just in principle difficult after the governments you know to say we've got to get rid of it we don't need it why should we devote resources to it will be cherry picks right there will people say this will be a nice because you know ben is right the price is going to matter when we're talking about these thirty big companies but his price is going to be so important for the smaller ones. the price as important otherwise we're not in business but let me say that the key goal is long term goals and reasons for privatization if to save in short it's modernization of our business and

integration of our business in the world's business this to directions of the development of the business the right time in bad times like crisis and when we're talking about the timing for proposition let me emphasize one important stage negotiations not only about the price what we're going to do together that's an extremely. worth a really good point taliban bit and you're going to see a lot of the media if i go to you tom here i mean again you know there are different objectives here and countries when they have privatization is going over for a number of reasons but is this for russia and i agree that timeframe is probably going to be pushed out here but it just shows it has to demonstrate that russia is a investment friendly destination because this is something that we've always talked about in the i know better how many years you've been here what sixteen or eighteen i've been here for almost thirteen and it's always russia as an investment destination came privatization kind of push that along be be a driver to show that russia is a better interesting place in

a place where you can make a lot of money under the right circumstances. growth participation is part of the bridge it's you know it's not enough on its own it's part of another story as well i know there's a liberalization of tires for example but privatization is something that the intention is very clear from the government so i think that if a very serious about this and i fully agree with everything that bent us that that they have russia's had twenty years of depreciation of assets if you look across say most of the russians are still mills they're operating in front close to full capacity right now and this goes across the whole economy and it's got to the station and russia where simply it's been creeping for a long time and now it's starting to break down and we've seen that as evidence of that as some of the tragic accidents that we've seen in the end in the actor actress and so on over the past couple of months it's evident that there's a real real problem in russia and russia has to do something government has to some of the show to foreign investors that they can guarantee stable returns on investment and one way of doing that is opening up the markets going transparency

creating predictability creating room floor creating chaos ability and privatization is very much part of that but i would get by is what i heard said of the beginning and then has to temper and and the other would are the reform process privatization is not just enough on its own knowing this pushing forward with the with the liberalization of tyrus for example is also absolutely key ok i guess we all can agree it's not a panacea we're going to go to a quick break we are gentlemen but after that break we'll continue our discussion on russia's privatization state largely. in the. soon which brightened. someone from feinstein.

whose phone starts on t. dot com. the faraway line. where human life is ruled by nature. of planet earth is scarcely preserved by the poor. animals lie hidden in the deep permafrost. and for those who deal with them prehistoric times are still. twenty years ago the largest country. to survive. but how did you try. to get it your. where did it take.

to. welcome back to on the money i'm peter lavelle which continue our discussion on privatization in russia and other business news happening around the world and to do that i'm joined by ben errors here in the studio with me he's the editor in chief of business new europe also i have it on chicago he's the chief economist for russia and c.i.s. at renaissance capital on monday he's the chief strategist so pretty and alexei the alcove he is the chief economist at euro simple little all right ben let's pick up where we left off in the first part of the program about privatization when we look at russia's privatization which we all agreed with me in the first part of the program that's not going to go anywhere fast because of our external events here but let's let. look at external events here how are other countries emerging markets going to be looking at this volatility because in some way you some of these are some real cherry picks out there i mean flight to quality i'm thinking of these kind of things and if you've got the cash you got to give emerging markets like russia second third look now though to the moment at the moment it's being

driven as far as i can see by pure terror you know the cost to melt down in europe and major banks european banks going through the world and people are doing what there was to them and they fly to the things that they think are the safest t. bills in the states gold but the irony of this is that many americans have sold off heavily if you look at the fundamentals they're in a lot more sort of position really this is a crisis of the west's not a global crisis and i don't know i mean this is we hear ok ok my business is maybe your fundamentals are right there is a container ship here i mean we've seen markets all over the world and you go to your home when you think about it i think the same i think that we all agree they can manage markets have made very big strides in terms of improving their underlying economic fundamentals but at the end of the day when things from google go south i think everybody routes for as for the exit and this exactly what has happened so i would agree with ben at this point of time we just have to play safe ok alexy what do you think about that everyone's going to play it safe here i don't

i'm not going to give up on the emerging markets i see a lot more opportunity even during crisis well i would think that. many people are so. things go bad in the world economy. as a previous safe place to invest so i think that. many people just want to get out of russia these days. pull their money in something more safe like american treasuries or other safe assets i don't know what do you think about that tom i mean the burning keys words coming out of the fed here we have a report coming out of the i.m.f. i mean there is do and gloom out there i mean just sit on your money. yeah i mean i've been holding dollars at the moment but i think the good news is if you are holding dollars russia is eventually and again you know like we saw the end of the two thousand and eight crisis will be very good value no brushless of a sovereign decision is very very strong especially in parts of europe and

peripheral european countries and that's reflected in a lot of mark's contraction in russian service presence the beginning of the year the problem for russia is that this is an economy that's highly highly reliance on the oil price or russia is the biggest highest peter plan emerging markets on the oil price so you know even if the fundamentals are very good because because you know russia needs a high oil price to balance its budget you can't buy oxys an environment where you think your price is going to fall i've mentioned russia is going to look really really good value and market republican and so we have certainty of what's happening in europe in europe and more stability you know price forecasting i'm going to stay out of russia but ok well then i want to go to you let's look at the euro crisis here right now i mean it's not if it's when when greece completely defaults and maybe is kicked out of the euro zone we've talked to the euro zone many times i'm in my cross time program what do you think about the house i could affect russia's fundamentals if the we continue to see indecision with the eurozone well it's a contagion effect i mean it's hammering the russian market i mean some are saying that there's going to be good value in the interest rate which is

a really good factor in russian equities i think the training price to earnings ratio is down around five in russia was the cheapest market and maybe under five yeah under five you see i mean it was already the cheapest market in the world before the crisis now it's doubly so i mean these are insanely cheap prices and at some point that's going to kick back in again but in europe it's they need to make a decision i mean you have to bail. them out and it's the do the ring that's really causing all the problems to the currency the fact that we could another meeting and we've got eight billion dollars or two in in three weeks and we don't know if they're going to get it's going to you don't have the whole of the russians taking it i mean we all know how the chinese are taking it but the emerging markets minister. did the ring that we see in the eurozone because people it's the biggest economic zone in the world market in the world and you have no political will right now in the eurozone i mean it really must really drive people kind of batty waiting for them to see what they're going to do because of just the simple trade relations

because to put it very mildly i don't think that this is something that's appreciated here. for me actually there's one key key and important difference right now in all of this story signs it doesn't and eight i still remember very vividly it was september two thousand and eight and couldn't we're saying that russia is an island of stability russia is a safe haven nothing will happen to us and who remember what happened in two thousand and nine in terms of g.d.p. collapsing where i think a little bit of a comfort here is that right now you hear acquitted and other person saying that will be affected so i think that the previous crisis actually gave the russians a little bit of a learning lesson and i think it's a positive election and it's a really good point too that we have a huge learning curve here. you can go back to the one nine hundred ninety eight or two thousand and four then we have two thousand and eight i mean russia has learned a lot i mean business is a loaned out and the governments in how to deal with volatility outside of its borders i mean is as we go through this turbulence right now how well positioned is

russia to ride this storm out. well i think that basically the russian fundamentals are novels thrown about the situation by change pretty soon i mean there are two factors that are critical to the stability of the russian economy one of these crisis and another thought to ease credit expansion souls so far. away it's pretty stable and it doesn't drop significant it significantly but also the president spends and it's pretty good in the russia but the problem with the current market situation is that basically there is going confidence crisis even banking system in the euro zone and it will also spread into russia and when that happens there will be a sharp decline in credits and this will affect the economy all ok ok

john let me go to you for if we see that happen is it really real across the economy will contract it will just go flat. so a problem for russia is that it's difficult to see i mean one side you know it's great that for me the profile of just that profile is much much better now than it wasn't two thousand and eight not in terms of overall foreign that are the same and signs of that repayment schedules russia's pressure maturity fits that profile which is great news now is reflected in a very minor contract expires the c.d.s. price for example for russia but again big problem is the ballot the budget balance is a high price now and russia hasn't learned from that and again maybe something let's from this well you can but it's very interesting this time is running out of money on public sector it's very interesting this time around we have the saudis making it very clear that they have to have a very stable oil regime because of the arab spring because of expectations within the kingdom they're going to make sure that certain amount of money go in that actually is that russia will be able to take full advantage of how critical is that oil regime right now if we have the main player one of the major players in all

pick like opec say they will support in oil price and a certain price well prices first you should say it's a mug's game trying to predict or price of oil is what brought down in ninety eight when i went to ten dollars how does it there's no lack of ratchets i mean bear in mind that i think it was only in two thousand and six the russian budget broke even twenty five dollars per barrel and today it's one hundred twenty dollars that's a massive change. for the saudis i mean the talking about something eighty to one hundred dollars they need to break even but you know the russians are taking a bet they're saying we've got this all revenue and we can vest heavily in the country because we need infrastructure we need factories we need power and we have the money at the moment because there were prices so high and that all of this stuff will bring growth and. bring some sort of momentum to the country's economy so that when oil prices do venture to go down the time for the program once it ratchets up it usually stays pretty high. i mean i think i expected to but it's

a good guess but you know if the ore prices come down to seventy dollars. sixty dollars a minute for some of the austerity and what would be the net result russia would turn into a normal country where it wasn't reliant on oil and what with that it would push them even harder in the necessity of diversifying the economy and do all those things we want them to do so would it be such a great thing i mean certainly would hurt but would it be such a bad thing well usually before you might think twice what you want to go to here is the u.s. is experiencing a double dip we knew that we know that in two thousand and eight they found out that they'd been in recession for almost a year before it was declared a recession it is a double dip right now how they could affect you and the emerging markets because they prepared for this russian prepared for well first of all i think really is quantitative easing going to have any effect anymore as it is into that now well first of all i think that if you look at the markets i think the markets are i just surprising two different outcomes right now a lot of vacillating between tomorrow to do outcomes number one is maybe we're

going to have a mild recession along the lines of one thousand nine hundred or two thousand and one or we're going to have any peak at the dozen and eight in any case the market i think is pricing we're starting to price as a baseline recession so this is number one the second and the answer to your second question is how russia will be affected certainly should not be living in a should not be complacent and should not be deluding ourselves and russia will be affected but still i think that will not going to definitely into a negative territory next year ok let's see what are you actually more quantitative easing going to make any difference now for the u.s. and for the rest of the world i mean i think theme our emerging market worlds are tired of going and getting these are inflated assets bubble saw floating all over the place that we've had enough of it isn't going to do any good for the u.s. well in the end the greenback i think the wanted to be easy and which is basically are and wanted to response and there's not really are hoping more because the problem is not to give are mindful of the banks the problem is to give money

to people so that people spend more and when you sort of. you increase the amount of money by the banking system but the banking system does not really pass this money to people because of the risks associated risks could be this. confidence crisis is also a serious problem they're already talking about we're almost running out i want to go to. the. it quantitative easing keep you up at night. you know what keeps me up and i is that is that is the unknown in europe you know i don't personally think that there is a big driver overseas because the marketplace didn't get out because of the last time and it hasn't really creates the out any expert but it's the. model modest as as i've been saying a modest. recession in the us where we can start to price that the markets pricing pretty well already it's the blowouts in europe that i think's really worry like it's right now and we need to start muddling through and find

a resolution so that i don't get finally finally consensus among us all here ok i want to thank my guests and thanks for viewers for watching on the money see you next time you stay with our team. home.

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