08/13/1998 14:04:08 Soros has strange love affair with Russia
By Andrew Priest
LONDON, August 13 (Reuters) - A call by international
financier George Soros for Russia to devalue the rouble marks
the latest twist in the Wall Street wizard's 10-year
philanthropic and commercial involvement in Russia's affairs.
Since the break up of the Soviet Union in 1991, the
Hungarian-born hedge fund manager has spun a web of interests in
Russia and Eastern Europe ranging from social and educational
projects to commercially motivated investments.
But his latest pronouncements, which fuelled a further wave
of selling on Russia's markets, have raised a few eyebrows given
his oft-stated policy of only making comments which benefit his
financial interests, Russian experts said on Thursday.
"It's very difficult to understand how this can serve his
commercial interests," said Brian Henry, professor of economics
at the London Business School.
Multi-billionaire Soros turned up the heat on Russia's
ailing financial markets on Thursday by stating in a letter to
Britain's Financial Times that the "best solution" to the
present banking liquidity crisis would be to introduce a
currency board after a "modest" rouble devaluation of 15 to 25
"The meltdown in Russian financial markets has reached the
terminal phase," Soros wrote, adding that any delay would result
in default or hyper-inflation.
In the past Soros has freely admitted his willingness to
talk up his own book to defend his vested interests, analysts
In an article in the Times of London in 1993 he said, "I
expect the mark to fall against all major currencies, including
even sterling," adding, "for the sake of full disclosure, I am
talking my book."
The financier still has plenty riding on the success of
Russia's economic reforms despite speculation he has been
reducing his commercial interests in recent months, analysts
Soros, who studied philosophy at the London School of
Economics, said last October he had some $2.0 billion invested
in Russia including a stake in Svyazinvest, the state telecoms
In March, he told journalists in Moscow he had turned down a
request by the Russian government for financial help last
December, but had loaned it several hundred million dollars to
close a short-term funding hole in June 1997.
"They were stuck. Payment was due on a Thursday and they
needed the payment on the previous Thursday," he said at the
But despite his financial interests in Russia, analysts said
Soros, whose speculation helped send the British pound spinning
out of the European Exchange Rate Mechanism in September 1992,
also has an emotional attachment to the country.
Soros has invested millions of dollars of his personal
fortune in his Open Society foundation, a collection of social
and educational projects set up to promote democracy in Russia
and Eastern Europe after the Soviet Union's demise in 1991.
"Soros has been active as an investor as well as a supporter
of the reform process in Russia on the philanthropic side - I
suspect he was trying to be helpful (in the letter) and call it
as he sees it," said Charles Blitzer, chief emerging markets
economist at Dolaldson, Lufkin and Jenrette.
The financier is no stranger to criticism of his involvement
in Russian affairs.
Following his purchase of the stake in Svyazinvest, he
acknowledged he had stirred up resentment among Russia's
industrial and financial barons.
"By participating in the Svyazinvest auction, I interrupted
the division of spoils and unleashed a ferocious battle," he
said on a visit to Moscow in March.
Soros has spoken out about his concerns about policy making
in Russia on previous occasions, most recently on the way foreign
shareholders were treated by some Russian corporations and the
failure of the local supervisory authorities to act.
London-based institutional investors were largely ambivalent
about Soros's statement.
"He has as much right as you or I or anybody else to make
pronouncements. Whether people choose to listen to him is
another matter," said Mark Cooke who manages around $250 million
in Russia at Brunswick Capital in London.
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