Opposition leader Alexey Navalny laid out his economic credentials to investment bankers in Moscow’s Ritz Carlton hotel as he challenges President Vladimir Putin’s ally for mayor of the Russian capital.
About 100 investors and businessmen from banks including Deutsche Bank AG and Renaissance Capital paid 7,800 rubles ($234) a person to quiz Navalny on his plans over a dinner of steak and potatoes on Sept. 2. Sergei Guriev, an economist who fled Russia this year citing fear of criminal prosecution, organized the event and spoke to the crowd from Paris via video.
Navalny helped organize the biggest protests against Putin’s 13-year rule and his July 18 conviction for embezzlement sparked street demonstrations, condemnation from the U.S. and Europe and a drop of as much as 1.6 percent in the benchmark Micex Index. While he trails Acting Mayor Sergei Sobyanin by 40 points in opinion polls, he’s gained ground since being released pending appeal of his five-year prison sentence.
“Many people at the event said the main thing Navalny has done is return politics to the streets,” Pavel Vasilyev, director of structured financial solutions at Sberbank CIB, said by phone from Moscow. “For investors, it’s important to see how he interacts, understands them, to determine the extent of his influence on the Russian political scene, on the economy.”
In his free time, Vasilyev said he distributes Navalny pamphlets on the subway and talks to his neighbors about the opposition leader. Some bankers declined to comment on the record because of the sensitivity of attending the event.
“If I wasn’t repressing my sentimentality, I would be crying all the time,” Navalny told guests. “Before the event two investment bankers approached me and said that they stand on the streets and distribute my pamphlets. These people have a salary 10 times higher than mine -- they probably shouldn’t be standing outside and distributing pamphlets. But they stand and distribute them because they’ve probably realized that it’s the most rational economic decision for them.”
Navalny’s program, drawn up by Guriev, includes boosting competition among utilities companies, raising funds through sales of unused city property and increasing tax collection by promoting small and medium-sized businesses.
He has the support of 18 percent of decided voters, compared with 58 percent for Sobyanin, according to an Aug. 27-30 poll of 1,000 people by the Levada Center, which gave a margin of error of no more than 4.8 percentage points.
Russia, the world’s biggest energy exporter, is grappling with its steepest economic slowdown since a 2009 contraction as weaker growth in the euro area and Asia curb demand for its products. Gross domestic product will rise 1.8 percent this year, compared with an earlier estimate of 2.4 percent, the Economy Ministry said last month.
The Micex has lost 7.3 percent this year, underperforming all major European indexes. Russian equities have the cheapest valuations among 21 emerging economies tracked by Bloomberg at 5 times 12-month estimated earnings, compared with a multiple of 10.2 for the MSCI Emerging Markets Index.
The central bank forecasts net private capital outflows of about $70 billion to $75 billion this year, Chairman Elvira Nabiullina said in an interview with the state-run Itar-Tass news service published yesterday.
As the economy loses steam, a “realistic political alternative” such as Navalny is interesting, according to Sergey Romanchuk, head of foreign exchange and money markets at OAO AKB Metallinvest Bank in Moscow.
“We need to restart economic growth, boost investment appeal,” Romanchuk, who attended the Ritz event, said by phone. “If this campaign proceeds within a civilized political battle, this political campaign itself will also improve the investment climate.”
Navalny, who didn’t receive any proceeds from the dinner, said his mayoral campaign has raised 100 million rubles ($3 million). Last month, 38 Russian Internet entrepreneurs endorsed his candidacy in a manifesto that called for a defense of the rule of law, support for independent courts and accountability of government officials to society.
“The best news about Russia is that Alexey Navalny is running for Moscow mayor,” Guriev told investors from screens positioned around the Ritz’s ballroom. “We see that capital is leaving Russia and this is probably due to the fact that investors doesn’t believe that Russia will grow at the speed it could be growing if it were fighting against corruption and protecting minority investors.”