The City of London supports Moscow as a financial trading center

As Lord Mayor of the City of London last year, I spent more than 100 days overseas, conducting business missions to countries and financial centres identified as key markets by leading City firms. On these trips I showcased the City’s strengths, promoting it as an attractive location for inward investment, while helping international firms overcome any potential barriers that could impede market access.

Returning from my business mission to Russia in July, it became clear to me that Russia’s potential is much like the matryoshka doll: the outer shell is large, but it is only the surface. In order to get the full scope of the country, each layer must be opened up and understood. At the heart of these layers lies the smallest of the series of dolls, and it is this figure that investors are interested in – the raw potential offered by Russia’s markets.

Although the potential is there – solid and tangible – youth and potentiality tend to go hand-in-hand with a degree of unpredictability. We want to help Russia continue to create the right conditions to attract international business and international investors.

This is partly why Russia and the City have so much to offer each other. The financial services sector in Russia is still developing, and much of our work with the Russian authorities has involved building up Moscow’s capacity as an international financial trading center. Developing Moscow will increase international trade volumes, and that will mean more opportunities for both the City and the UK as a whole.

When I was in Moscow last year, I co-chaired the third meeting of the City of London-Moscow International Financial Centre Liaison Group, alongside the president’s nominee, Alexander Voloshin. We want to see support for Moscow in building up its capacity as a financial trading center – so it can support the development and diversification of the wider Russian economy. We have already seen encouraging results from these meetings – and I anticipate that the coming year will bring more opportunities for co-operation between our two countries.

Great progress will be made as the Russian economy continues to diversify, and there are a number of opportunities for UK-Russia co-operation to be explored in the meantime, in areas ranging from the pharmaceuticals industry to financing waste treatment projects and renewable energy.

2011 was a strong year for Russia, showing the strength of the market and the strength of Russian Initial Public Offerings in it. The year saw six IPOs on the Main Market and two further offerings – the capital raised amounting to over $7 billion. Moreover, two companies transferred from Global Depository Receipts to premium listing and entered the FTSE 100 index.

This year has equally demonstrated great focus – the European Bank of Reconstruction and Development has been working closely with the Russian authorities on mobilizing finance to modernize assets, expanding markets and increasing efficiency. Banking services penetration remains relatively low – just over 40% of loans to GDP, compared with 123% in China and well over 100% in most developed markets. Good progress is being made.

This amounts to a major contribution to building up Russia as a major market economy. While in Russia we spent time looking at how we could work together to increase banking services penetration and how we might reform the banking sector – especially the involvement of state banks – to attract foreign investment and transfer human capital.

Clearly however, it is not just Russia that stands to benefit from the forging of closer ties between our two countries, particularly with regards to financial services. As the British prime minister said in a speech in Moscow last year, some people talk about trade as a competition in which one country’s success is another’s failure. But the whole point about trade is that – as he put it – we’re baking a bigger cake and everyone can benefit from it. As one senior visitor to London said to me: if we do well, you do well, and if you do well, we do well.

UK firms stand to benefit at every stage of the process, be they infrastructure firms engaged in public-private partnerships or financial services firms able to operate in an increasingly open and stable marketplace. But that is not all. The City is far more than just a global financial center – it is global legal center as well, providing legal expertise to international business. Those legal services are an integral part of our offer to global business - it is part and parcel of the UK’s commitment to upholding the rule of law. 

Within the last few months, we have opened the largest specialist and high tech center for the resolution of financial, business and property disputes in the world at the Rolls Building – an investment in our future as a center for international law, and international business.

The number of disputes resolved through arbitration and mediation in the UK was well over 34,000 in 2009 – up from less than 20,000 in 2007.

More international and commercial arbitrations take place in London under English law than in any other city in the world – with 90% of commercial cases handled by London firms involving an international party.

The future holds all kinds of possibilities for greater partnership between our two nations. This is why we look forward to working closely with Russia in enhancing these projects, and developing and deepening our partnership in years to come.