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19 Dec, 2008 11:37

American investors looking for Rouble stability

American business is getting more concerned about investing in Russia as the government lets the Rouble fall and protects local producers. Russian authorities maintain they'll support local businesses to prevent job cut

The weakening ruble is cutting importers revenues while protectionist measures taken by the government are raising concerns over their future. Andrew Somers, the head of the American Chamber of Commerce in Russia says US investors are getting nervous due to uncertainty about the Rouble.

“Within two months American investors became more concerned. But they have confidence in robust future of the Russian market. The largest concern is the Rouble. Its pretty hard for the Russian government to give certainty on the Rouble right now.”

American businesses attitude to investing in Russia is also affected by problems at home. This month General Motors and Ford announced plans to stop production lines at their plants in St Petersburg for at least two weeks.

That came just days after the Senate refuse to give financial support for the troubled American car makers. Meanwhile the World bank acknowledges Russia’s market conditions are deteriorating.

To prevent job cuts and boost consumption the government has raised import tariffs to protect local producers. Farm machinery, cars, and food import will all face higher import duties. Zeljko Bogetic, Chief Economist at the World Bank Russia, says the measures are logical but won’t solve the fundamental problems of the economy.

“The problem is not, you know, whether the tariffs should be high or low. Competition is good, competition forces everybody to cut costs, to become more agile, and to innovate and expand production, and meet consumer demand. So, I think the Government intervention should be better focused on how to unfreeze the credit markets here, and how to make sure that the liquidity support to these banks and corporations is now transferring, and the credit markets are beginning to work.”

The bank has reduced its forecast for Russian economic growth from 8% to 3% next year. But it says Russia won’t enter a classical recession, as the average oil price is likely to stay around $70 per barrel.