Goldman in Moscow

Goldman Sachs is a formidable force wherever in the world it operates. So it's likely to do well in Moscow, where it's now announced plans to add another 25 bankers, at somewhere north of $5m per annum apiece.

Goldman, famously, last made a concerted push into Russia just weeks before the government defaulted on its domestic debt, caused massive losses across the worldwide financial system, and precipitated the disastrous meltdown of Long Term Capital Management. But I don't think anybody's worried about that happening again this time round. Rather, the worries are more on the ethical side:

Goldman was slower to invest in Russia than some of its rivals because of concern that the integrity of the country's financial markets, Chief Financial Officer David Viniar told investors last year.
"There are a lot of things to do" in terms of getting rid of corruption in some parts of the economy and creating legal certainty, Dibelius said.

Goldman also let Brazil's Banco Pacutal slip out of its hands recently, when its planned $2 billion joint venture with the local investment house was scuppered by similar ethical concerns. In the case of the Brazilians the problem wasn't corruption, so much as a refusal to buy into US notions about Chinese Walls and the like: Pactual is both a formidable trading shop and also a major fund manager, and doesn't believe that information can't travel between the two sides.

In the end, Pactual was bought outright by UBS, which means that UBS can implement whatever kind of Chinese walls it likes. Goldman was always in a weaker position, because it only ever wanted a joint venture, rather than an outright acquisition.

It makes sense that Goldman is looking to expand organically in Russia, rather than, say, buying Russia specialist Renaissance Group – the US investment bank is never particularly comfortable making acquisitions. But its Russia strategy is also high risk, since the Goldman name doesn't carry the same cachet in Russia as it does elsewhere. It will be hard for the firm to oust the likes of Morgan Stanley and Credit Suisse from the top slots in the Russian league tables.