When it comes to Russia, one might use all of Dostoevsky’s works or sum it up with Gogol, Chris Weafer, a strategist with Sberbank, said in his outlook for Russia for next year.
“If you read ‘Dead Souls’, you will see exactly what is meant both as a social commentary and also as an example of how one can make money of even the most unusual circumstances,” Weafer wrote.
“Russia, for all the bad headlines regularly generated, has been the most profitable country investment (among the major markets) over the past 10 years, notwithstanding the collapse in 2008.”
However, he admitted, the problem when one uses classic masterpieces by Russian authors is that a book with a happy ending is very hard to find – but maybe things will change as the country steps into a more prosperous era.
“The only event that counts as a happy ending is the release from misery, and that is usually in death,” said Weafer. “Perhaps somebody will have cause to write [a book with a truly happy ending] soon.”
The main market and reform scenarios linked by him to major Russian works of art are the following:
War and Peace
This theme has to do with external threats, where the Sberbank analyst sees conflict first and peace later.
Just like in Leo Tolstoy’s work, in which the war caused great economic and social destruction but eventually Russia prevailed, the investment backdrop for next year is seen as a “very volatile first half” followed by “a more peaceful second half.”
The Master and Margarita
Mikhail Bulgakov’s novel is seen by Weafer as an appropriate metaphor for Russia’s oil vulnerability. Margarita, the novel’s heroine, is tempted by the promise of an eternal good life just as much as Russia was tempted by “seemingly never-ending oil revenue growth” before 2009.
Bulgakov’s novel is set in Moscow and Jerusalem, “which is also appropriate given the current events in the Middle East and the effect they have on the risk premium for Brent and Urals.” Crime and Punishment
In Fyodor Dostoevsky’s novel, the main hero has conflicting feelings about himself, oscillating between self-loathing and pride, contempt for others and need for them, and despair and hope of redemption.
“This is a very apt analogy for the Russian reform agenda in that it is clear that these are issues which must be dealt with, but the preference is to avoid taking any action that may be politically or socially unpalatable,” said Weafer, adding that “eventually they must be confronted,” but this will not necessarily happen next year.
The Queen of Spades
Alexander Pushkin’s short story deals with the obsession of winning and always being ahead, “even at the cost of one’s sanity and soul,” the Sberbank analyst noted.
“The warning is that without reforms, growth may not last,” he added. The expansion of the domestic economy, including the strong growth in consumer spending, have supported Russia’s economic growth in recent years. But “if there is no reform and one continues to rely on luck, then eventually the good fortune stops.”
Dead Souls
Nikolai Gogol’s masterpiece “has a lot of relevance to events today,” Weafer wrote. The hero tricks landowners into selling him apparently worthless dead serfs, under the pretext that he intends to use them to pose as a landowner in Siberia. In reality, he wants to inflate his standing, gain status and eventually take out a big loan against the dead serfs he owns.
The Sberbank analyst said the “dead souls” metaphor is “close enough” to the Russian state’s ownership of strategic industries, particularly in oil and gas. “With a high[1]tax regime and state regulation, many of the stocks in these sectors have low valuations relative to EM peers and are more lowly valued by investors when compared with the fast growing domestic industries.”
One Day in the Life of Ivan Denisovich
Alexander Solzhenitsyn’s book about a day in the life of a prisoner trying to survive the Gulag is seen by many as one of the most influential works of the 20th century. According to Weafer, it “may have metaphorical relevance to many of the regulated industries, such as the utilities.”
He said there are opportunities for “small victories” no matter how gloomy de outlook for some industries, and these victories “can make an otherwise miserable day seem less bad at the end of it,” just like in the novel. The Cherry Orchard
Anton Chekhov’s last play illustrates the inability of an aristocratic family to adapt to changing times and save its fortune and “is often used as an example of the futility of trying to maintain a status quo when faced with the inevitable.”
“Change is inevitable – it is how you handle it that matters,” Weafer said.
A Hero of Our Time
The main character of Mikhail Lermontov’s story has relationships with two women at the same time for a while but, just as he finally rejects one of them, is in turn rejected by the other.
“It will be tough to satisfy the state’s wish to control strategic industries and also to bring in investors,” warned Weafer. “Trying to satisfy two mistresses is impossible over a long period, and by the time you choose which you prefer, it may be too late and you could end up losing on both fronts.”
Home of the Gentry
Ivan Turgenev’s novel is about how the past can catch up with the hero when least expected but also about how some truths are best left unsaid.
Russia has left the cruelty of its Soviet past to embrace a Western lifestyle, Weafer said, but is there a chance of a return to “a less optimistic and less happy existence full of regret and longing for what might have been?”
“In the 21st century, thankfully, that chapter has not been written yet,” he concluded.