Real Estate Growth Firm Despite Crisis

Although the credit crunch in the United States and Europe and ensuing fund market crisis has affected real estate prices all over the globe  last year real estate price growth in …

The largest increase in elite real estate prices (33.7 percent) was reported in Bulgaria, while Singapore followed at 31.3 percent. Russia holds the third place with 30 percent growth, followed by Montenegro (26 percent), Poland (22.4 percent) and Hong Kong (22.3 percent). 
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Quite different trends were seen in Russia, Singapore and Hong Kong. Singapore, Hong Kong, Moscow and St. Petersburg are large developing cities that attract real estate buyers from many regions. They provide stability and offset the negative influences of mortgages and the financial crisis, Tein said.

In 2006 real estate prices in Russia grew by 40 percent unprecedented growth for any other country during that period. Moscow saw 92 percent price growth. 
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More than 20 new elite projects were announced in Moscow last year, while in 2006 there were just seven. Tein concluded that this trend demonstrates the high confidence of investors in the further growth of real estate prices in Russia. Most of the new projects will be realized in 2008-2009.

In 2007, the price of elite property in Moscow grew by over 20 percent. Based on the price dynamics for January-March this year…

Another expert forecasted that the negative effects of the crisis on the real estate market could intensify this year.

The growth of real estate prices in Russia is based mainly on the growing demand for property, fuelled by soaring profits from oil and gas export, said Maxim Mikhailov, executive director of Maris | Part of the CBRE Affiliate Network.

The bank crisis is putting pressure on prices to decrease, but with no effect so far. Speculative investors are quitting the market while institutional investors remain. So far prices in Russia have not decreased, but over the next few months the situation in the financial markets is likely to get worse and then the effect of the crisis on real estate will be more evident, Mikhailov said.

As a result of the crisis, investors profits are decreasing, he indicated. Increasing interest rates are also a negative trend for the real estate market, but in Russia the share of bank financing in development projects is small.

Banks usually finance large successful companies with large turnovers and liquid assets. Middle-sized and small companies have to use co-investors and give away a share of their profits, Mikhailov said. 
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However, in the Baltic States the crisis has already dampened real estate markets. The rate of price growth has decreased from 66.6 percent in 2006 to 7.1 percent last year in Riga, from 23 percent to 0.9 percent in Vilnius, and from 23.8 percent to 14.5 percent in Tallinn.

The labor movement has been making a lot of headlines lately. Workers at multinational companies were the first to strike for higher wages, but now the conflict has spread to Russian firms. In mid-March, workers at the KamAZ car plant the former flagship of Soviet industry walked out on their jobs, and by the end of the month, bauxite miners in the Urals were also striking.

In all of these conflicts, company management has justified their extremely aggressive behavior by blaming workers for Labor Code violations while at the same time denying striking workers the right to conduct negotiations through their elected union representatives. The reason is that management refuses to recognize the legitimacy of worker-formed unions. Instead, they only grant official status to the purely symbolic unions, which are leftovers from the Soviet era that operate under an umbrella organization called the Federation of Independent Labor Unions.

At most enterprises, the local branch of FILU functions like a department of social affairs run by the general director. Although FILU might serve some useful purpose, it is by no means a labor union. To fill the gap, a handful of a companys workers often form fledgling unions of their own. Usually, the director calls the offending workers into his office one at a time to demand that they withdraw their membership in the new union. If they refuse, he transfers the activists to low-paying jobs or fires them. The official union supports the companyТs management and owners. Management can usually find justification for these actions in the Labor Code.

Rather than giving management the upper hand, however, these strong-armed tactics against unions often lead to spontaneous strikes. One example of this occurred in late March at the Little Red Riding Hood mine, north of Yekaterinburg. The Independent MinersТ Union existed at this mine for many years. But the IMU can be considered a worker-formed labor union only in a limited sense. The organization has a history dating back to the widespread minersТ strikes of 1989. At that time, the mineТs management refused to recognize the new worker-formed IMU and preferred to conduct talks with the official FILU Ч tantamount to negotiating with itself. The result was that the number of unresolved issues continued to accumulate, culminating in spontaneous strikes that spread to neighboring mines. RusAl, the companyТs owner, closed all five of its mines in the Sverdlovsk region as a preventative measure. Management claimed that the move would Уprotect the lives and health of the other workers who are not involved in the current situation.Ф But they never explained how the loss of jobs and income would protect those workers.

Only after the strikes had already started did the companyТs administration suddenly take an interest in the IMU, but by then it was too late. The IMU could have called off the strikes only if it had been empowered to represent the miners earlier on.

From the beginning, the Labor Code was written in such a way as to make life easier for management. But business leaders are realizing that repressive measures do not work and that it would be more effective to negotiate with freely elected unions than to face the consequences of spontaneous and uncontrollable strikes. Even an organized strike would be easier to cope with than a spontaneous uprising. It is no longer a question of whether authorities will revise the Labor Code, but of when and how.

The Kremlin and State Duma will have to face the new reality of the workersТ movement, whether they like it or not.

Boris Kagarlitsky is the director of the Institute of Globalization Studies.

The U.S. presidential candidates are increasingly playing the Russophobia card in their campaigns. In addressing Russia, Senators John McCain and Hillary Clinton have resorted to insulting President Vladimir Putin as a KGB spy who has no soul. Russophobia is truly back into fashion, as Senator Joseph Biden admitted last week in a comment published in The Wall Street Journal.

U.S. politicians can hardly claim that they know a lot about Russia. Unable to even pronounce names of RussiaТs leading politicians, many in the U.S. establishment are nevertheless convinced of RussiaТs inherent propensity to violate its own citizensТ rights and bully other nations.

The attacks on Putin and President-elect Dmitry Medvedev are widely supported in mainstream U.S. media. This demagoguery also extends to scholarly publications, such as The New Cold WarФ by Edward Lucas, who claims that УRussiaТs vengeful, xenophobic and ruthless rulers have turned the sick man of Europe into a menacing bully.Ф Just published, the book is getting a lot of publicity and is treated as a serious treatise by influential organizations, such as the Council on Foreign Relations.

Despite the anti-Russia rhetoric, many U.S. politicians feel that Russia doesnТt matter in the global arena. Instead, they are preoccupied with other international issues, such as Iraq and Afghanistan. But Russia should matter, particularly in a world of new security threats and growing energy competition. The attitude of ignorance and self-righteousness toward Russia tells us volumes about the U.S. unpreparedness for the central challenges of the 21st century.

RussophobiaТs revival is indicative of the fear shared by some U.S. and European politicians that their grand plans to control the worldТs most precious resources and geostrategic sites may not succeed if RussiaТs economic and political recovery continues.

One Russophobic group, exemplified by McCain, includes military hawks or advocates of U.S. hegemony who fought the Cold War not to contain the Soviet enemy but to destroy it by all means available. The second group is made up of Уliberal hawksФ who have gotten comfortable with the weakened and submissive Russia of the 1990s. They have an agenda of promoting U.S.-style democracy and market economy. The fact that the Soviet threat no longer exists has only strengthened their sense of superiority.

Finally there are lobbyists representing East European nationalists who have worked in concert with ruling elites of East and Central European nations to oppose RussiaТs state consolidation of power as well as promote NATO expansion, deployment of elements of a U.S. missile-defense system in Poland and Czech Republic, and energy pipelines circumventing Russia. These groups have diverse but compatible objectives of isolating Russia from European and U.S. institutions. Because of a lack of commitment to a strong relationship with Russia in the White House, a largely uninformed public and the absence of a Russian lobby within the United States, the influence that these groups exert on policymaking has been notable.

Russophobia is not in U.S. national interests and is not supported by the American public. Various polls demonstrate that Americans do not agree with the assessment that Russia is a threat to the United StatesТ values and interests. A recent BBC World Service poll revealed, for example, that 45 percent of Americans have a mainly positive attitude regarding RussiaТs influence in the world, compared with 36 percent who have a mainly negative attitude.

Yet Russophobia-driven groups have generally succeeded in feeding the media an image of Russia as an increasingly dangerous regime. Thousands of reports in the mainstream U.S. media implicate the Kremlin and Putin personally in murdering opposition journalists and defected spies. Only a handful of reports in less prominent outlets question such interpretations.

Although it matters greatly which candidate will enter the White House in November, the more important issue is whether there will be a fundamental psychological adjustment in Washington away from Russophobia.

To be sure, the healing of the U.S. Russophobic mindframe is going to require a lot of time. Winston Churchill once commented that U.S. politicians Уalways do the right thing in the end. They just like to exhaust all the alternatives first.Ф If this indeed is the case, we will not see a framework for meaningful cooperation with Russia any time soon.

Andrei Tsygankov is associate professor of international relations at San Francisco State University.