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. Last Updated: 07/27/2016

The View From Wall Street Is Upbeat

bloombergYakobashvili and Maher, second and third from right, ringing the New York Stock Exchange's opening bell Thursday.
NEW YORK -- A giant Russian tricolor billowed next to the U.S. flag above the imposing entrance to the New York Stock Exchange. Inside, Wimm-Bill-Dann management and main shareholders performed the traditional ritual of corporate respectability -- ringing the opening bell on the floor of the exchange.

The occasion: the fifth anniversary of the Russian juice and dairy giant's initial public offering.

At a breakfast in the exchange's opulent boardroom before Thursday's ceremony, NYSE chief John Thain was all smiles and handshakes as he handed out commemorative medallions to the Wimm-Bill-Dann hierarchy.

"We are always interested in more Russian companies coming here. So if you know of any, then please pass that on," he said.

But roadblocks may be looming for Russian companies interested in making money in the U.S. market, either by floating shares on the stock exchange or by acquiring U.S. assets. Political winds are shifting in Washington after the Democrats won both houses of Congress in elections last November, raising fears that the lawmakers might adopt a tougher stance against Russia and Russian investment.

Earlier last week, Tom Lantos, chairman of the House International Relations Committee, renewed his call to have Russia stripped of its membership in the Group of Eight following new charges against former Yukos chief Mikhail Khodorkovsky.

Barney Frank, the new chairman of the House Financial Services Committee, took a jab at the Kremlin in a speech last month. Praising the security of the U.S. market, he said: "Where do you want to invest? Russia? So Putin can steal your company?"

Things looked rosy back in June 2001 when President George W. Bush first met President Vladimir Putin and made his now-famous remark about looking into his soul. It was eight months later that Wimm-Bill-Dann went public in a heavily oversubscribed offering that valued the company at nearly $1 billion.

David Yakobashvili, Wimm-Bill-Dann's co-founder and a major shareholder, said he had "no regrets" about coming to the United States. His company flew a group of reporters to New York for the anniversary.

Yakobashvili downplayed suggestions that a more critical atmosphere in Washington might have a knock-on effect on Russian investment. "What the leaders, the rulers, do is one thing, but business is different," he said, arguing that with money to be made, investment would continue to grow.

Citing the much-publicized example of Sakhalin-2, Yakobashvili said that although he did not agree with Gazprom's methods, the terms of the previous contract had been extremely unfavorable for Russia and had to be renegotiated. Investors could appreciate that difference, he said. Shell sold a controlling stake in the gas project to Gazprom in December after months of pressure from federal environmental officials.

Sergei Garmonin, Russia's consul in New York, similarly brushed aside the idea that the political climate might affect businesses. "If you look at the figures for the past few years, they have been going up, and I expect that to continue," he said.

Suggesting that talk of a worsening investment climate was being fueled by the media, Tony Maher, the Irish CEO of Wimm-Bill-Dann, said he had encountered high interest from the 20 potential investors he had met during a company road show in Boston and New York earlier in the week. He said he was surprised that no investors had mentioned Sakhalin-2 or other instances of perceived state interference in business.

Serious foreign investors have been able to "put the high-profile issues into perspective," said Brian Cox, a senior executive with the U.S.-Russian Business Council, which represents U.S. firms in Russia.

With Rosneft and other Russian companies opting to float in London, where securities regulations are more relaxed than in New York, NYSE officials are touting the potential access to eager U.S. investors that the exchange offers.

"The BRIC countries [Brazil, Russia, India and China] have been very sexy, so I think there is continued interest, and the companies that have listed here are just going up and up," said Greg Krowitz, managing director of the NYSE's Global Corporate Client Group.

Some observers said the continuing business optimism represented an unusual divergence from the sharpening criticism in Washington.

"The rhetoric is getting tougher, and business communities on both sides of the ocean should brace themselves for upcoming election campaigns," said Blake Marshall, a Washington-based analyst at PBN, a strategic communications firm specializing on Russia.

Senators John McCain and Joseph Biden, contenders from the Republican and Democratic parties for next year's presidential election, are both sharp critics of Putin and what they see as his backsliding on democracy.

Lantos, a longtime critic of Putin's record on democracy and human rights, is pushing Bush to adjust his policy on Russia, Lantos spokeswoman Lynne Weil said. "Certain issues might get more of a hearing," she said, adding: "Congressman Lantos did not like what President Bush saw when he looked into Mr. Putin's eyes."

Still, Weil said, little can be done to change the U.S. policy toward Russia as long as Bush remains in office.

With Congress having no formal vote on a fall agreement aimed to facilitate Russia's long-delayed entry into the World Trade Organization, the most likely forum for criticism will be an expected request by the White House to repeal the 1974 Jackson-Vanik amendment. The amendment, initially linking Soviet trade status to Jewish emigration, means that Russia's current trade status is subject to annual review and must be repealed before the country can be granted normalized trade relations.

U.S. politicians have yet to squawk about a Russian business deal -- even though they could have criticized Evraz Group's purchase of Oregon Steel for $2.3 billion, a deal that cleared U.S. regulatory hurdles last month.

"People in Washington looking at the deal from a political point of view were very matter of fact. This was just another U.S. company being bought by a foreign investor," said Randy Bregman, a U.S.-based partner at law firm Salans, which represents a number of Russian investors in the United States.

With Russian companies flush with cash, many experts agree that Evraz's purchase is unlikely to be the end of Russian expansion in the United States. In fact, steelmaker NLMK said Monday that it and Swiss-based Duferco Group had teamed up with U.S. steel services firm Esmark to buy U.S. independent steel producer Winner Steel.

"Russian companies and investment banks are certainly more interested in acquisition targets in the U.S.," Bregman said.

Further Russian investment in strategic sectors of the U.S. economy could lead to a tit-for-tat political spat down the line, said Denis Maslov, a Russia analyst at Eurasia Group. "At some point there could be a major investment that will cause a backlash politically," Maslov said, citing a possible expansion attempt by Gazprom as an example.

Despite Lantos' repeated concerns over Russia's record on democracy and human rights, business appeared to be another issue. His spokeswoman said he was unaware of the Evraz-Oregon Steel deal.

With both the unions and management at Oregon Steel endorsing the Russian takeover, political objections ultimately may have to take second place to business expediency. "Some constituencies, including Democratic ones, will prosper from Russian investment," said Cox of the U.S.-Russian Business Council. .