Mandelson Says Russia Riding High in Crisis

Russia is well-equipped to withstand the financial crisis, and foreign investors are not jumping ship, British Business Secretary Peter Mandelson said Wednesday as he wrapped up a four-day visit that showed significant improvement in London's troubled ties with Moscow.

Thanks to its oil- and gas-financed surplus, "Russia is better placed than others to weather the storm," Mandelson told reporters, adding that he felt common sense prevailed in the government.

Mandelson also said he hoped that "my visit will intensify a thawing of the difficult political relationship that we have experienced."

In the first visit of a British Cabinet member since February 2007, Mandelson on Tuesday held talks with First Deputy Prime Minister Igor Shuvalov and Finance Minister Alexei Kudrin, with whom he revived a steering committee for Russian-British investment that he said had been defunct for six years.

In a softening of its rhetoric, the Foreign Ministry said after Mandelson met Foreign Minister Sergei Lavrov on Monday that both countries needed to overcome their political differences.

"We could not have wished for a better reception," Mandelson said of his Moscow visit.

Russian-British relations have been in a downward spiral unseen since the end of the Cold War after the 2006 poisoning death of former security services agent Alexander Litvinenko, the forced closure of British Council offices in Russia and London's tough stance on Russia's actions in the brief Georgia war.

Mandelson said there were no signs of a drop in confidence among his country's business community. "There is no sign that U.K. investors are pulling back from Russia or downscaling their plans," he said.

Rather, he argued, both countries are being driven together by a common need to fight the crisis, which threatens to damage Britain's position as a top source of foreign direct investment in Russia.

"The importance of those investment relations is only increased by the current crisis," he said.

Both countries will embark on high-level cooperation to solve the situation, with Prime Minister Gordon Brown and President Dmitry Medvedev meeting at an anti-crisis summit in Washington in the upcoming weeks.

Yet in a sign that even during a trip abroad Mandelson was not immune to a political storm back home, some British newspapers reported that the cost of Mandelson's suite in the Baltschug Kempinski Hotel is advertised for 150,500 rubles ($5,570) per night.

The headline in the Daily Mail read "Fit for an Oligarch," although the accompanying article quoted a spokeswoman for Mandelson as saying the hotel was charging only ?860 ($1,380) at a discount rate.

British media and the Conservative opposition have hounded Mandelson over the past two weeks over allegations that he lowered aluminum tariffs in favor of oligarch and metals tycoon Oleg Deripaska during his tenure as the European Union's trade commissioner. Mandelson, who was appointed business secretary earlier this month despite having resigned from Cabinet posts twice in a political career dogged by scandal, has denied any wrongdoing. He has acknowledged meeting Deripaska several times since 2004, most recently as a guest on the billionaire's yacht off the Greek island of Corfu in August.

Speaking at a news conference in the British Embassy, he angrily refused to answer a reporter's question about his relationship with Deripaska. "You have wasted your question," he said.

George Osborne, a British lawmaker in charge of treasury policy for the Conservatives, apologized Monday for his own visit to Deripaska's yacht during his vacation on Corfu, saying it "didn't look very good."

The opposition party is now demanding that Mandelson provide a full account of his dealings with Deripaska.

However, Mandelson took pains to explain Wednesday that the ability to build relationships with business leaders was important in international politics and one of his main qualifications for his Cabinet post. "That is what I have been bringing to this job, and I will continue to stand up for British interests and British jobs," he said.

He said his four-year tenure as EU commissioner made him the right man for the job because he had established good ties with government officials, including Shuvalov, Kudrin and State Nanotechnology Corporation head Anatoly Chubais.

In a speech at the Higher School of Economics late Tuesday, Mandelson made a passionate plea for free trade, warning that protectionism and "resource nationalism" were wrong solutions because they ran counter to openness and prosperity. "All countries need to collaborate to create the conditions for a recovery," he said.

A key component of this would be to keep markets open, he said. "We know the links between trade and growth -- Russia's renewed economic strength over the past few years is in part due to the growth in the wider global economy," Mandelson said.