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. Last Updated: 07/27/2016

Businesses Warily Eye Elections

From the boardroom to the hotel room, the oil industry to real estate, businesses in Moscow are suffering from the impact of the coming June presidential election.


Even as broad measures of Russia's economy reflect continuing stabilization, indicators of Western business activity on a specific level -- such as apartment rentals to foreigners and hotel bookings -- are falling sharply. There is nothing a corporate executive hates as much as uncertainty, and incumbent Boris Yeltsin's prospects seem uncertain at best.


"Business with foreigners has fallen by 40 percent," said Natalya Byelova, manger of the showing by the Communists in December's parliamentary elections, Western firms have been deferring major decisions on investment here until after June, hoping that Yeltsin -- seen as relatively pro-business -- will prevail.


Although U.S.-based Atlantic Richfield Co. and Anglo-Dutch Shell Corp. last week announced strategic alliances with Russian firms LUKoil and Evikhon respectively, an industry analyst said the ventures would not start immediately.


"They are sitting and waiting until the outcome of the elections," said Alexander Blokhin of the United Financial Group, adding that political risk and an inadequate legal base are delaying decisions on billions of dollars in foreign investment in the Russian oil industry. "This will only change by the second half of 1996," he said.


Foreign business activity at Moscow's hotels seems to be on the same course.


"We have noticed that fewer people are coming over from abroad, and business is slowing in some points," said Tatyana Kovaleva, a sales executive at the hotel, attributing the downturn to the "unstable political situation." She did not provide specific occupancy figures.


Another hotel manager, who declined to be identified, said "business is down, especially among Americans," but said "it is still too early to say whether this represents a wait-and-see attitude with the elections or is just a seasonal flux."


One executive said the trend reflects Western business' more cautious approach toward the Russian market in the wake of the December polls.


"There is definitely an attitude that business is taking it more slowly," said Mark Mourer, partner of the banking and financial services audit group for Ernst and Young. "Before they just wanted to know how to get over here as quickly as possible, but now they are more cautious."


Jeffrey Burt, chief partner for Russia with Washington's Arnold and Porter law firm, said that legal and business activity had slowed since December.


"Western companies have put major projects on hold to see what's going to work out," Burt said, adding that a Yeltsin victory would be a "stabilizing factor."


Russia's stock market has been in the doldrums for most of this year, with traders citing political factors, although volume has picked up in recent weeks.


Another sign of reduced corporate activity is falling apartment and office rentals. At Blackwood Real Estate Company, which caters primarily to foreigners, business is down 30 percent, said Mikhail Akopov, the firm's administrative director.


Although some businesses are not reporting a falloff in activity, they have measured a slowdown in recent growth.


"People are not keen to do more than what they are currently doing," said Peter Panduro, country manager for the Russian Federation at DHL, an U.S. express mail company.


But Panduro attributed the trend to normalization in the Russian economy.


"Business activity might be affected a bit by the elections, but you cannot expect it to stop because of a political event," he said.





-- Natasha Mileusnic contributed to this report.