ATHENS, Greece–The St. Petersburg International Economic Forum ended its meetings 10 days ago. By all accounts, it was a successful gathering of many important and powerful people in business and politics.

I was able to report on the event last year, too. (See SRI, 28 June 2006, Speaking Of Bears.) Some fairly close friends of mine in the investment management business have attended for the last three years and have been able to inform me first-hand.

High-level executives from companies around the world participated in the forum. Some of the attendees included the CEOs of Royal Dutch Shell, BP Plc, Arcelor Mittal and Siemens, the chief operating officer of Coca-Cola, and the vice chairman of PepsiCo. The biggest delegation was from China, with 168 executives.

On the business side, there was USD13.5 billion worth of deals signed–much more than initially expected. The majority were either FDI-related (e.g., Suzuki Motor of Japan agreement to build a car plant outside Moscow for USD135 million) or orders that Russian companies placed with foreign suppliers.

By far though, the contracts between US-based Boeing and several Russian companies were some of the largest deals signed at the forum. For starters, Russian national carrier Aeroflot will buy 22 Boeing 787 Dreamliners. Boeing will also assist with global marketing and service for the Russian Sukhoi SuperJet and has a broad cooperation agreement with state-owned United Aircraft, which is expected to revive Russia’s aviation industry.

The above notes fly in the face of all the rubbish that eager politicians and their “advisors” are feeding to people regarding the beginning of a new Cold War and the like. Even the didactic and threatening tone of the outgoing British prime minister–regarding British companies investing in Russia only if the country acts according to Britain’s ideas of political correctness—in comments made during the Group of Eight (G-8) summit were immediately forgotten.

The BP CEO was one of the first in the forum because its company’s interests in Russia are substantial. A lot of people forget that BP’s classification as one of the Super Oils now rests on its involvement with Russia hydrocarbons. If the company loses that, its status will change dramatically.

As I have written before (see GE, 7 June 2007, Vladmir And Angela), the economic interdependence between the growing Russian economy (now the eighth largest in the world) and the West is increasing rather than subsiding. And although you shouldn’t expect a smooth ride, there will be more positives than negatives going forward, with the assumption being that cooler heads will prevail.

Of course, as long as Russia continues to grow and modernize its economy and its middle class increases in size and influence, its political culture will also change toward adopting more Western European suggestions.

Nevertheless, Russia remains open for business, and the companies that have decided to play by the rules–as they must do in any other country they invest in–have not only profited handsomely but also have build strong foundations for their future.

New Portfolio Addition

Long-term readers know that Russia has been a favorite area of mine for years now. Although the investment case initially was related to the county’s energy sector, I’ve also been highlighting the increase in domestic demand and the big infrastructure boom that have been taking place there.

We’ve played the domestic demand story through Vimpel-Communications in the Alternative Holdings Portfolio, and the stock has done very well for us.

Today, I’m adding one more wireless telephone company to the Portfolio. Mobile TeleSystems (NYSE: MBT) is the largest cellular operator in Eastern Europe, with 50 million subscribers. The company has licenses in 87 Russian regions, Ukraine, Belarus, Uzbekistan and Turkmenistan, covering a population of more than 233 million people.

In the most-recent quarter, the company reported 143 percent year-over-year earnings growth to USD 448 million, 23 percent above the market’s expectations. Vimpel has been the better performer of the two–the main reason being Mobile TeleSystems bigger exposure to Ukraine, which is a more-competitive market–and SRI readers have been the beneficiaries of that.

Nevertheless, Mobile TeleSystems will be catching up with Vimpel once its investments in its various markets start producing the desired results as the company consolidates operations and takes advantage of its market’s growth. Management expects full-year growth of 22 percent this year, which is much higher than most analysts were initially expecting at 17 percent. Buy Mobile TeleSystems.

Fresh Money Buys

If you’d like to add to your positions in Portfolio recommendations or allocate new funds, focus on the following markets, in order (for both countries and sectors): South Korea (banking), Hong Kong (real estate, publishing, infrastructure), India (pharmaceutical, banking), Malaysia (ETF), Russia (telecommunications, energy), Taiwan (technology, telecommunications), Singapore (telecommunications, banking, industrial), Europe (oil, pharmaceuticals, industrials, communications equipment, media), Japan (industrials, banking), China (consumer, coal, power, oil, water) and Macau.