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There are very few people in Russia that could be trusted to provide a reliable  picture of where the Russian economy is going. One such person is Rair Simonyan, the first Russian chairman of American investment bank, Morgan Stanley, and later of UBS. Over a 14 year career at Morgan Stanley, Simonyan brought hundreds of billions of dollars in IPOs, mergers and acquisitions and direct foreign investments to Russia. So when Simonyan speaks, it is always worth listening to him as in the following interview. Of course, we need to keep in mind that absolute honesty, as, for instance, in criticizing Putin, could be deadly in Russia regardless of who you are. On the other hand, Simonyan is less than above board on the results of all these investments in the glory years before 2008. The fact is that virtually everybody that invested money in Russia, lost most or all of it. I speak from experience as one who spent a lot of time in Russia in those years as a consultant to a major investment bank.


Nonetheless, Simonyan paints a truthful picture overall of  why Russia is going nowhere economically with average growth of 1% per annum, the country completely cut off from international credit markets and the number of start-ups in the 140 million strong nation now smaller than those in next door Finland with its population of 5.6 million. This explains why, Morgan Stanley, the last major western investment bank still in Russia, is calling it quits in early 2020 after 25 years in the country.


I grew up, says Simonyan, with constant sanctions in the Soviet Union and this is what creates the mentality of a fortress under siege. It is possible to survive with sanctions and do it for a very long time. But this is the road to autarchy and it’s a road to nowhere. It is the Soviet Union in the late-1970s, when it was clear that the system was doomed. But to develop, to grow, you have to be part of the world’s scientific-technological development process, otherwise you will never be anything but a Third World player. Huawei thought that it could become a global player despite this rule, but it turned out that it was a giant on feet of clay.




From the beginning of the sanctions the Russian government likes to repeat that the sanctions would allow Russia to develop its industry, its technologies in isolation. Unfortunately, this is Soviet rhetoric. Yes, it is possible to produce something in isolation from the world, but it would be either of lower quality or more expensive and the consumer would have to pay for this. It is also possible to grow pineapples in a hot house, but at what cost? It is the same with the financial markets. Without access to the capital resources of the world you can create something, but you’ll never be a world player.


At Morgan Stanley the structure is flat. They hire you to make money, but you decide what deals to make and they assist you from London or New York if you need help. In Russia, people do not believe in institutions but in people that they can order and control. These are not corporations, but feudal principalities that kill initiative. That’s why Morgan Stanley was a serious supplier of talent for Russian corporations and not the other way around.


In the past, you have criticized the government for lacking projects that are national in scope. Now they have been introduced and gigantic amounts of money would be poured into them. Do you believe that this would make it possible to achieve the growth rates of 3% of which Vladimir Putin speaks?


In principle, the national projects are not bad and spending a lot of money on them is not bad either. But I don’t believe that the government could be a good owner and can spend the money effectively. Some state companies could even be more effective than private companies. The government could support some companies, but its main task is to create a business environment that makes it possible for people to want to invest and create value. Always when we talk about government money, the illusion is created that it knows what it wants and how to spend the money. Yet, in the absence of clear standards and a competitive economy, the efficiency of spending government money is impossible to judge.


In Russia, I don’t see reasons why the economic growth rate should accelerate. The level of economic activity of the population is very low. If we don’t take decisive measures to change that, we’ll continue to live like we do now.


By Alex Alexiev

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