By Bloomberg
A nondescript office in Riga’s communist-era Institute of Mathematics and Computer Science may be Latvia’s last line of defense against threats to next month’s general election.
There, the nation’s 29-strong CERT cyber-security group, is bracing for its biggest test to date: repelling attempts by Russia to sway the voting process. Having studied meddling in the U.S. and fellow European Union members like Germany, the team is schooling state employees on suspicious emails and website links that could be phishing attempts, all the while receiving “threat feeds” from NATO and allied countries.
Elsewhere, the government is working with Facebook Inc. and Twitter Inc. to stem the spread of fake news. Ballots at the Oct. 6 vote will be scanned electronically and can be counted by hand, should concerns arise at any precinct, adding an extra layer of security.
“The awareness that something could happen is clearly much higher” than during the last election, Varis Teivans, CERT’s deputy head, said in an interview in a secure room containing some basic furniture but no computers. “It’s clear our big neighbor, Russia, has carried out offensive cyber operations against the Baltic states.”
Latvia has particular grounds to be wary: at a quarter, ethnic Russians are a bigger chunk of the population than in Estonia or Lithuania, making the country an attractive target for Putin to try to sow discord inside the EU. On top of that, a political party catering to the Russian minority may have its best shot at taking power for more than a decade.
The Baltic region on the EU’s easternmost fringe has felt military pressure ever since President Vladimir Putin swiped Crimea from Ukraine in 2014. But more high-tech threats emerged there long before Russian hackers were accused of aiding Donald Trump’s path to the White House.
Estonia suffered what’s widely believed to be the first large-scale Russian cyber assault in 2007 amid a row over relocating a Soviet-era monument in its capital, Tallinn. A massive denial-of-service attack ensued, crippling government, banking and media websites.
The interference didn’t stop there. Estonian prosecutors recently unearthed a scheme in which Russia secretly bankrolled three supposedly independent news websites, dictating stories containing Kremlin talking points, Buzzfeed News reported in August. One was allegedly instructed to play up tensions in the U.S. or the EU, as well as the Ukraine conflict.
“Our adversary is reactive and opportunistic,” Liisa Past, a former chief research officer at Estonia’s Information Security Authority, said by phone. “Its goal isn’t so much tampering with the result of elections as de-legitimizing the process, raising questions and doubts, much like we saw with the U.S. presidential elections.”
Lithuania is also on alert. It’s banned state institutions and companies from using software made by Russian anti-virus maker Kaspersky Labs, citing national security, and has even warned citizens against installing a taxi app from Moscow-based Yandex NV.

By Bloomberg
The Trump administration is helping Vladimir Putin achieve a goal that’s eluded him for almost two decades—getting Russia’s billionaires to start repatriating some of their assets.
Relatively muted sanctions imposed during the Obama era over the conflict in Ukraine have only widened in scope and severity since Trump took office last year. The unpredictability of both the White House and Congress is forcing Russians to move money into state-run banks and rejig the offshore superstructure that’s sheltered fortunes here since communism’s collapse.
Tycoons and their executives say the rush to move assets beyond the reach of the U.S. Treasury started with the biggest enterprises in April, when Oleg Deripaska and Viktor Vekselberg and their companies lost billions within hours of being hit with the harshest penalties to date. Now the trend is accelerating, spurred by the threat of even more draconian measures over Russia’s alleged election meddling and nerve-agent attack on a turncoat spy in England.
“It’s toxic to be Russian,” said Oleg Vyugin, a former senior central bank official who is now chairman of the Moscow Exchange. “And the richer you are, the more toxic you are.”
Most of Russia’s biggest non-state exporters have emptied their accounts in the U.S. and Europe, with many transferring funds to state-run banks or local units of European lenders, several people familiar with the matter said. The central bank doesn’t publish statistics specifically on repatriated funds, so it’s difficult to know exactly how much money companies are bringing back.
But Sberbank PJSC, Russia’s largest lender, just reported a 17 percent jump in corporate holdings in all currencies in January through August, to the equivalent of about $98 billion. And balance-of-payment data show Russia’s private sector brought more financial assets home than it sent overseas in the second quarter for only the third time since sanctions started in 2014.
Putin in June renewed his call for rich Russians to bring capital back to “where it’s earned” to the benefit of the motherland. But the problem is that Russia’s stagnant and increasingly state-dominated economy offers few prospects that would justify the level of investment Putin needs to achieve the “decisive” breakthrough he’s seeking in his final term, which runs to 2024.
A sanctioned shareholder of a company with close ties to the Kremlin summed up the current climate by recounting a recent conversation he had with his personal asset manager. The manager called to congratulate him on a good year—good because he hasn’t invested in anything so he’s got nothing to lose.
What efforts the government has made to ease the repatriation process haven’t been encouraging. The special sale of a Eurobond in March raised just $200 million, or 5 percent of the target. And so far there’s been little interest in the two “offshore” zones inside Russia the government created to encourage the relocation of overseas companies by offering tax-free dividends in exchange for full transparency.
With no comprehensive plan for assistance from the government, companies are being left to prepare for tougher U.S. measures on their own. The penalties on Deripaska, in particular, shocked boardrooms across Russia into action. The billionaire’s United Co. Rusal, the biggest aluminum supplier outside China, was almost forced to halt production after international banks froze the accounts of companies he controls regardless of the currencies they held.
“It showed how any international business can be brought to its knees in a second,” said Slava Smolyaninov, a strategist at BCS Global Markets in Moscow. “That was a real eye-opener for many tycoons.”
Since then, exporters that have long dealt mainly in dollars, which dominates global trade, have taken steps to minimize their use of the U.S. currency. They still hold substantial amounts of dollars and euros for commercial purposes, but they’re starting to stockpile rubles for emergency use or future payouts to their owners.
Mining giant MMC Norilsk Nickel PJSC, whose shareholders include three billionaires—Deripaska, Vladimir Potanin and Roman Abramovich—held almost all of its cash deposits in foreign currencies just a few years ago. Now it holds more than half in rubles, about $1.5 billion worth, and is planning a record $1.8 billion interim dividend for the first half.
While there’s no sign Russian companies are preparing to abandon the dollar altogether, major exporters are increasingly asking lenders to allow dollar loans to be repaid in other currencies if they suffer the same fate as Rusal. They’ve also been testing the appetites of foreign counterparties for settlement in alternative currencies.
Diamond monopoly Alrosa is already selling gems to some Asian clients in rubles, after accepting rupees from an Indian customer for the first time. At least one major metals company is selling more of its output for euros and experimenting with sales in Chinese yuan.
But it’s not just money that’s being repatriated. Moving corporate registrations home is becoming a lucrative business. Alexey Mordashov and Alisher Usmanov are just two of the billionaires who’ve transferred stakes in major enterprises to Russia-registered companies in the last few months.
By some estimates, sanctions-related legal and consulting work is now a $100 million-a-year industry in Russia. And the boom shows no signs of ebbing, according to Ilya Rybalkin, who started his own practice this month with a dozen other lawyers who left western firms to join him.
“Demand for high-end legal services and lawyers who can navigate their clients through the hostile environment of sanctions is only going to grow,” Rybalkin said in an interview in Moscow.

By Bloomberg
During the past decade, China has been investing a lot of money in sub-Saharan Africa:
Some Western observers worry that this represents a new form of colonialism. Given the continent’s history with European conquerors and rich countries trying to cheaply exploit its natural resources, that suspicion is understandable. But although China can sometimes be predatory — for example, when uneconomical projects saddle African companies or governments with unpayable debt — the new African investment bears little resemblance to the colonialism of old.
Colonialism, and the pseudo-colonial exploitation that sometimes followed independence, was mostly about extracting natural resources (and sometimes slave labor). Although securing access to natural resources is surely one of China’s goals, its investments in Africa go beyond extractive industries. The sectors receiving the most Chinese money have been business services, wholesale and retail, import and export, construction, transportation, storage and postal services, with mineral products coming in fifth. In Ethiopia, China is pouring money into garment manufacturing — the traditional first step on the road to industrialization.
Receiving foreign investment isn’t the only way that a country can industrialize. But as China itself has shown in dramatic fashion during the past few decades, attracting foreign capital can be a key part of an effective growth strategy. When a company from China — or the U.S., Japan, France or elsewhere — employs Africans to make clothes, program software or build houses, African workers immediately share the benefits. This also provides income to local African entrepreneurs, who create new businesses to sell things to the foreign companies and their employees.
And if countries are smart about appropriating foreign technology, it can lead to long-term productivity increases as well. As Africans learn techniques, ideas and tricks from foreign companies (and invent new ones themselves), they will gain the leverage to capture an ever-bigger slice of the value that foreign investments create — and as their productivity improves, that value will grow in size. Meanwhile, African governments will control access to an increasingly large share of the world’s young customers, and will be able to use this leverage to extract ever-greater concessions — money, technology and favorable contract terms — from multinational corporations.
Instead of standing on the sidelines and wringing their hands over China’s investments, Westerners and people in other rich countries should be looking to copy or surpass China’s efforts to tap the final frontier of emerging markets.
The biggest reason Africa will be important is population. Look up any map of total fertility rates, and you can easily see that with a few scattered exceptions, sub-Saharan Africa is the only place where people still have large families. Though family sizes will decrease as the continent becomes richer — this is already occurring — Africa is still expected to experience much more population growth than anywhere else:
By the end of this century a third of the world’s population, and a greater fraction of its young people, will be African. The future of Africa is synonymous with the future of the human race.
As the continent becomes more populous, those companies with an established presence in Africa will be better positioned to sell into burgeoning African markets. They will have the local market knowledge, connections and distribution channels to beat out rivals who failed to invest early.
Several other trends make investment in Africa a more tempting prospect. Literacy rates have increased rapidly. Malaria deaths have fallen by almost half since the turn of the century, and hunger and child mortality have both plunged. A healthier and more-educated populace is much better equipped to read instructions, absorb information and show up for work consistently. Meanwhile, increased literacy and internet access is uncovering vast pools of previously hidden African talent.
Governance is also improving. The big wars of the 1990s and 2000s are mostly over. Democracy is proliferating, as coups and strongman autocrats become rarer. Measures of governance have improved. More stable government means a more stable environment for businesses looking to invest.
There is no shortage of potential investment destinations. The continent has 54 countries, sporting a dizzying array of institutions, languages and comparative advantages. Six countries in particular — Mozambique, South Africa, Nigeria, Ghana, Zambia, Ethiopia and Kenya — have emerged as early leaders:
My Bloomberg Opinion colleague Tyler Cowen is especially enamored of Ethiopia, whose sense of historical pride he believes will drive it to seek rapid growth. The Chinese seem to concur.
The second question is what to invest in. Africa still isn’t competitive with China in terms of manufacturing costs, but as Chinese wages continue to rise, the gap is narrowing. But an even more important sector could be services. A recent Brookings Institution report shows that in many parts of Africa, growth is now concentrated in tradable services related to agriculture, information technology and tourism. Kenya, Rwanda, Senegal and South Africa have emerged as IT service leaders. As manufacturing becomes more automated around the world, expect the service sector to grow in importance.
A third possibility is housing and infrastructure. Those billions of young, wealthier Africans will need places to live, roads to travel on, solar energy to power the air conditioners that protect them from global warming, water infrastructure, and so on.
So Westerners shouldn’t worry that investing in Africa means repeating their ancestors’ colonial sins. In the modern global economy, funding productive industries is more important than grabbing resources —a win-win relationship instead of exploitation. China understands this, and appreciates Africa’s huge, untapped productive potential. The West should, too.